When setting up your pension scheme in payroll, it is important you first ensure your Group details are correct with the pension provider. If you use PensionSync, the scheme details will be automatically synced to the payroll software. This includes pay period dates, certification levels, contribution levels, and whether you're using qualifying earnings.
In your main Pension Settings screen you can see the Group synced with the pension provider (if using PensionSync) or you can manually create the Group to replicate as shown below. In payroll, this is referred to as the Contribution Plan.
This example shows a plan set up not using salary sacrifice but the contribution taken using the Relief at Source method from pensionable pay:
This is the most common scenario for 5% employee contribution and 3% employer. It is shown in a pay run as follows:
If your scheme certification is set up to calculate deductions based on Qualifying Earnings (QE), this box would also be ticked:
For the current QE thresholds, please see this article from the Pensions Regulator.
The contribution calculation based on qualifying earnings reduces the amount paid as shown below:
If you hover over the Employer and Employee question boxes, you can see the breakdown:
You can also use Qualifying Earnings when using salary sacrifice. In the example shown below, this Contribution Plan is set for 5% employee contribution through salary sacrifice, calculated on qualifying earnings. The employee’s deduction would be added to the employer’s and sent to the Pension Provider as an employer-only contribution. This salary sacrifice scheme would have the default Contribution Plan set up as shown below:
In a pay run, you can see the employee’s salary sacrifice deduction is separate but will be added to the employer’s amount in the PensionSync submission:
Additionally, you can override the individual’s pension contribution levels by amending the percentages in the employee's Pension Settings screen as shown. The first example is overriding the employee to 10% and the employer to 5%:
The second example is overriding the employee’s percentage to using salary sacrifice on an individual basis. This would generate a total of 15% being sent by the employer (10% employee and 5% employer):
Things to know
Please note that when setting up a Group to use salary sacrifice, the Pension Provider my require the employer's contribution to be set as a minimum of 8%. Therefore no employee contribution is expected (specifically NEST who do validate both the employee and employer's contributions to their expectation).
This would show with zero as an employee amount and you will be unable to override this if synced with PensionSync, unless you change the scheme to being ‘Maintained Manually’. However, you will be changing the expectation and the file may not pass validation when being submitted (i.e. NEST):
In this case, you would need to override each employee’s contributions on an individual level by heading to their Pension Settings and changing as follows:
This will ensure 8% minimum is sent to the Provider as an employer-only contribution.