When an employee is on paid parental leave, they can continue participating in the pension scheme. Employers need to make pension contributions based on their usual pay as if they were working normally.
- Employer contributions are calculated using the employee's full salary right before the leave started.
- Employee contributions depend on the actual pay received during paid leave.
Pension contributions usually stop during unpaid leave, unless the employee’s contract states otherwise.
If an employee pauses their own pension contributions while on parental leave, employer contributions may also stop.
Salary exchange (also called salary sacrifice) arrangements
When pension contributions go through a salary exchange, these count as employer contributions. Employers should keep paying the full pension contribution during maternity leave.
Salary exchange arrangements cannot reduce an employee’s pay below the National Minimum Wage.
Further information
Find out more about maternity and paternity leave and pensions on MoneyHelper: Maternity and paternity leave and your pension
If you have questions about employer pension contributions during parental leave, consider talking to a financial adviser or legal expert.