Pension contributions and childcare vouchers

Pension contributions and childcare vouchers

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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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By tom123
04th Aug 2015 15:51

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.

 

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Euan's picture
By Euan MacLennan
04th Aug 2015 17:31

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.

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By Moonbeam
04th Aug 2015 17:32

The Employer amount

I will not be able to get Brightpay to automatically calculate the employer amount by ignoring the childcare vouchers.

The point is whether the employer should be ignoring the childcare vouchers or not when calculating their contribution. It clearly makes a difference to how much is paid into the employee's pension fund by £6.00 a month.

The client will have no idea about the solution to this. There is no point in approaching their pension provider, as I will probably get forwarded to some hopelessly ill informed clerk.

 

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By Moonbeam
04th Aug 2015 18:23

Thank you both Tom and Euan for answering a rather tedious question. I will ask Sage how they can justify the setup. Maybe I've inadvertently set things up wrong myself - not surprising as Sage payroll pensions stuff is so complicated.

Luckily the client company is run by some nice people so I hope to give them several suggestions for how we go forward and deal with the past.

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