Auto-Enrolment Is Coming: Key Steps for Local Businesses
- facebo9
- Sep 29
- 4 min read
January 1, 2026 marks a watershed moment in how retirement savings are handled in Ireland. The new Auto-Enrolment (AE) system — via My Future Fund — mandates that employers deduct pension contributions from eligible employees, match those contributions, and remit them to a central fund.
Here’s what every business should understand — and what you must do now — to be ready.
Contributions: Who Pays, and How Rates Rise to 6 %
Contributions are shared among employees, employers and the State. But the rates are phased in gradually over the first ten years.
Years since start | Employee | Employer | State top-up | Combined |
Years 1–3 | 1.5 % | 1.5 % | 0.5 % | 3.5 % |
Years 4–6 | 3.0 % | 3.0 % | 1.0 % | 7.0 % |
Years 7–9 | 4.5 % | 4.5 % | 1.5 % | 10.5 % |
Year 10+ | 6.0 % | 6.0 % | 2.0 % | 14.0 % |
Important financial caveats:
Contributions are calculated only on gross pay up to €80,000. Earnings above that are excluded from employer and State contributions.
During unpaid leave, no contributions are deducted for that period.
The rates are fixed — employees or employers cannot pay more or less under AE.
In year 10+, an employee on €40,000 would see €2,400 from themselves, €2,400 from their employer, and a State top-up of €800 — total €5,600.
Because AE contributions do not receive the usual income tax relief, the State top-up replaces that relief mechanism. For example, rather than a high-rate taxpayer claiming 40 % relief, everyone gets the same fixed top-up. This means higher earners may face a relatively higher net cost under AE versus conventional pensions.
Who Is Eligible, and Who Is Excluded
Eligible for automatic enrolment:
Employees aged 23 to 60
Earning €20,000 or more across all employments
Not currently contributing to a pension scheme via payroll in that employment
Employed (i.e. not self-employed)
If a worker has multiple jobs, some of which carry pension contributions and some not, the jobs without payroll pensions may be subject to AE (if the total earnings threshold is met).
Excluded (or exempt) cases:
Self-employed / PRSI Class S individuals (e.g. some directors)
Directors with controlling shareholding who pay Class S
Employees already contributing to a pension via payroll (occupational pension, qualifying PRSA, etc.) for that employment
Possibly those under PRSI Class M (though not confirmed)
Earnings above €80,000 (no liability beyond that cap)
Periods of unpaid leave
Employees who exercise opt-out or suspension rights under the scheme’s rules
Because the regulatory regime is still maturing, businesses should watch for final guidance from NAERSA, Revenue or the Department of Social Protection, especially in edge cases such as Class M.
What Local Businesses Must Do Now
Map your workforce
Identify which employees fall in scope (and which don’t) under the criteria above.
Engage your payroll provider / software
Ensure your payroll system can identify AE-eligible employees, calculate contributions correctly, apply the €80,000 cap, manage opt-outs, remittance and reporting.
Decide on your existing pension scheme
If your organization already has a pension scheme, check whether it can be treated as an exempt scheme (i.e. the employee is already contributing via payroll). That may reduce the number of employees needing AE.
Communications plan for staff
Many employees will not understand the changes — plan training, Q&A sessions, explanatory materials, and clear breakdowns of net cost vs gross cost.
Contract, HR and legal review
Review employment contracts, pension plan rules, and ensure the legal obligations under the AE Act (including penalties for non-compliance) are understood and mitigated.
Budget forward
Use the table above to forecast employer contributions over the decade, allowing for wage growth, staff turnover, and possible rate increases.
Monitor official guidance
As final regulations, rules and systems mature, stay alert for updates (especially re: Class M, opt-out windows, enforcement, penalties) from NAERSA, Revenue, and government departments.
Why This Matters To Employees
Auto-enrolment is designed to supplement — not replace — the State Pension.
Employees will have six months after initial enrolment (and after any rate change) in which they may opt out; their own contributions are refunded, but employer and State contributions remain in their pension pot. (gov.ie)
If they opt out, re-enrolment will occur automatically after two years, again with an opt-out window. (gov.ie)
For many lower- or middle-tax rate employees, AE will meaningfully boost retirement saving with modest net cost; for higher earners, the loss of traditional tax relief should be fully explained.
Portability: their AE pension pot follows them when changing jobs, so long as the new job is within scope and they remain eligible. (gov.ie)
Auto-enrolment is a transformative reform for retirement saving in Ireland. For many employees, it will deliver a pensions benefit where none exists. For businesses, it imposes new financial, administrative and compliance demands.
But with proper preparation, clear communication to staff, and investment in systems and processes, local enterprises can turn this from a compliance burden into a trusted element of employee benefit and retention strategy.
Need expert advice for your business?
Reach out to AMQ today.
📞+353 65 902 4000 / +353 61 650 000 | ✉️ info@amq.ie| 🌐 www.amq.ie
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