A salary sacrifice pension scheme deducts pension contributions from employees' gross pay before tax and national insurance are deducted, meaning both the employee and employer pay reduced amounts of tax and national insurance.
📌Note: For information about salary sacrifice pension schemes, visit HMRC's website.
To set up a salary sacrifice pension scheme, you need to create two pay elements.
Employer's contribution
The first pay element you need to set up is for the employer's contribution. To do this, follow the steps below.
Click System, and then click Pay Elements.
Click New, enter a pay element code.
Click the Type drop-down, and click Deductions.
Enter a quantity of '1.00', and then select the Pension checkbox.
Select the Multiple checkbox.
Click Save, then click Yes.
Find and select the pension pay element, then click Edit.
Click the Multiple tab.
Select the Include in Multiple checkbox for each required pay element.
Click the Pension tab, and click the Pension Provider Format drop-down.
Click the pension provider being used.
If required, click the Scheme Type drop-down and click the required scheme.
To be included in auto-enrolment, select the Qualifying Pension checkbox.
Enter the pension percentage in Employer Contributions.
If required, enter a percentage in Add Employer's NI Savings.
Click Save.
Employee's contribution
The second pay element you need to set up is for the employee's contribution. To do this, follow the steps below.
Click System, and then click Pay Elements.
Click New, enter a pay element code.
Click the Type drop-down, and click Earnings.
Enter a quantity of '-1.00', and then select the Pension checkbox.
📌Note: If you see the error, Quantity must be greater than or equal to 0, you will need to enable allow negative quantities.
Select the Multiple and Salary Sacrifice Pension checkboxes.
Click Save, then click Yes.
Find and select the pension pay element, then click Edit.
Click the Multiple tab.
Click the Multiplier drop-down, and select either:
Percentage of Gross
Multiple of Rate.
Enter the employee's pension percentage into the Multiplier field.
Select the Include in Multiple checkbox for each required pay element.
Click the Salary Sacrifice Pension tab, then click the drop-down.
Click the Employer's contribution created in the above steps.
Click Save.