I have just moved a client from Sage payroll to Brightpay. There are 4 people in a pension scheme (they've been in it for years and this is not auto enrolment).
The scheme was set up as a GPP on Sage.
One employee has had childcare vouchers for many months. Sage payroll would use her gross pay less childcare vouchers to work out employee pension contributions, but just her gross pay for the employer contributions. I did not notice until now that there was a discrepancy between Ers and EEs contributions as the percentages are different.
It is not possible to replicate the employer contribution calculation on Brightpay, and I am not convinced Sage had it right.
I need to inform the client and discuss how we sort this out and that's not a problem if I know what should have happened in the past.
Where can I find an authoritative statement (that I can understand) about this scenario? Your opinions would also be welcome!
Replies (4)
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Why do you feel the current set up is wrong
Just wondering why you think there is anything wrong with the current set up?
Assuming the tax and NI is calculated correctly, does it matter how the pension values are actually arrived at?
The ERS percentage can be based on the 'reference' salary (which is the unsacrificed amount) if that is what they so desire.
The employee is free to choose to pay in what they wish, subject to any scheme rules. But this shouldn't actually give you a payroll problem as such.
Oh! I see what you mean!
I didn't understand why anyone would think of deducting a benefit to arrive at pensionable pay until Tom mentioned 'sacrificed'. At risk of being pedantic, salary sacrifices are often confused with the (usually non-taxable) benefits which the employer will provide in exchange. They are two separate things.
A salary sacrifice is a contractual reduction of the salary. Whilst it may be agreed between employer and employee that such things as overtime pay and the rate of pension contributions may remain based on the full salary, I cannot see how pensionable pay can be defined differently for the Er's and Ee's contributions. I am surprised that Sage payroll was able to do it and I believe that it was wrong.