A salary sacrifice pension scheme deducts pension contributions from employees' gross pay, before deducting tax and national insurance, meaning both the employee and employer could pay a reduced amount 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 in SelectPay, you need to set 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 the Payroll tab then, under Settings, click Pay Elements.
Under Record, click New Pay Element.
In the Code field, enter a description. For example, Salary Sacrifice ER.
From the Type drop-down menu, select Deductions.
Leave the Rate field blank then, in the Quantity field, enter 1.00.
Select the Multiple check box then select the Pension check box.
📌Note: If you need to deduct an exact value, clear the Multiple check box.
If required, select the PAYE check box.
Click the Multiple tab then select the relevant pensionable pay elements.
Click the Pension tab then enter the relevant employer contribution percentage.
Click Save & Close.
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 the Payroll tab then, under Settings, click Pay Elements.
Under Record, click New Pay Element.
In the Code field, enter a description. For example, Salary Sacrifice EE.
From the Type drop-down menu, select Earnings.
Leave the Rate field blank then, in the Quantity field, enter -1.00.
Select the Multiple check box then select the Pension check box.
📌Note: If you need to deduct an exact value, clear the Multiple check box.
If required, select the PAYE and NIC check boxes.
Click the Multiple tab then select the relevant pensionable pay elements.
Click the Multiplier tab then select Percentage of Gross or Multiple of Rate.
Enter the relevant deduction percentage or rate.
Click the Salary Sacrifice tab.
Next to Er’s Contribution Pay Element, click the magnifying glass icon.
Double-click the pay element you created in the previous section.
Click Save & Close.
Once you've done this, you need to assign both pay elements to the relevant employees.