PayrollSoftware for SalarySacrifice Pension Scheme

Any recommendations for software to handle flexibility of Sal Sacrifice Pension Scheme

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SAGE Payroll appears to default to setting up a Salary Sacrifice Pension Scheme with option of "same pension; increased net pay".

There is no option to calculate "same net pay (compared to what it would have been prior to Salary sacrifice arrangement); and increased pension". Which I think is known as "SMART Salary Sacrifice", i.e. it produces the biggest tax-savings (assuming one is a higher rate taxpayer and going to drawdown from pension in retirement at a lower tax rate)

Also, in SAGE Payroll, there is no option to automatically calculate passing on a % of the Employer NI saving to the employee (although the SAGE Payroll help articles explain a multi-step process to manually calculate this saving and then enter the findings into each employee record).

I see that Xero Payroll also lacks the feature of being able to automatically pass on a % of Employer NI saving.

Is there any good, cost-effective payroll software out there which is flexible enough to deal with this, i.e. choose the option to keep net pay at what it would have been and put all of the tax-saving into the pension (as well as allowing the employer to pass on a % of its Employer NI saving)?  Thanks for any tips...

Replies (5)

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By FactChecker
20th Apr 2024 15:22

I fear that you are, as they say, chasing unicorns ... although I'll be happy (and very surprised) to be proved wrong by anyone who knows better.

To take your main 'requirement' ... no Payroll in the world will know (and the ER has no right to know) all the factors that may determine the tax position of an individual EE such that your objective could be guaranteed to work.
That's not how PAYE operates ... it is merely a tool whereby, on average (and for the majority of EEs), an approximately 'correct' amount of Tax is taken from each employment payment - thereby helping to 'smooth' the deductions during the year (and of course assisting HMRC's cashflow).
BUT once HMRC have ascertained ALL the relevant figures for a taxpayer in a complete tax year (whether via SA and/or via the increasing number of direct feeds they receive from 3rd parties), that is the point when the person's true tax liability is established - and further tax is noticed as overdue (or less frequently overpaid), which will then be collected via an adjusted tax code or by straight-forward demand.

So, even if your mythical beast came into being (whether automated or via careful hand calculation), it is more than likely - especially since you've referred to HR taxpayers - that the eventual position of each person will NOT be what you wanted (or, but hopefully not, what you promised them)!

Thanks (4)
Replying to FactChecker:
By FactChecker
20th Apr 2024 15:36

FWIW your second requirement (option to automatically pass on a % of Employer NI saving) is not something I've seen in anything outside of the sort of Payroll software that comes with a price-tag in the tens of thousands.

My guess (and that's all this is) is that, although not in itself complicated, most ERs don't do this - and those that do have usually invented their own (sometimes algorithmically complex) definition of how much of that saving to 'pass on'.
Hence the big systems (that let you program in your own rules for almost any aspect of your remuneration policies - typically at great expense) are the only ones prepared to dip their toes in that murky water.

Because, like my previous response, PAYE involves a lot of rules that are interdependent and many (such as the fundamentals regarding Tax and NICs) are not comfortable bedfellows ... so when you 'tweak' a figure in just one place, the system may have to start processing all over again in order to pick up the impact in other areas.
And that is NOT what most payrolls (the system or the operators) want to hear.

Thanks (3)
By D V Fields
21st Apr 2024 11:25

Superpay has the facility to enter the required net pay receivable.

I am sure you would still need to physically enter the sacrificed amount so may need to perform a simple before and after calculation to derive the value.

However it is done you may be creating an unnecessary problem in that the pension contribution percentages may become non-standard and potentially changing month by month. I’ve know NEST to be problematic with this.

Passing on the Employer NI saving is not mandatory so may explain why payroll software providers don’t offer it. I think they would advise - just change the employer pension contribution rate.

Superpay’s helpdesk is good and knowledgeable and sometimes refreshingly blunt.

Thanks (1)
Replying to D V Fields:
By FactChecker
21st Apr 2024 17:53

Whilst I don't know Superpay, presumably you're referring to a net-to-gross calculator (a facility that many payrolls offer but not usually as an integrated part of the main payroll-processing run - i.e. the 'automation' that OP was seeking)?

However you have (possibly inadvertently) highlighted a major flaw in OP's dream ... if net pay is to be 'fixed' but gross pay may (even if not always) fluctuate, then OP's objective cannot be met through Salary Sacrifice.
Because as keeps being pointed out across multiple threads, SalSac is NOT just a deduction from gross pay .. it is a contractual reduction in Salary (so a new lower but unvarying Salary, not a variable salary depending on whatever amount is to be 'sacrificed' this month). And there are a limited number of 'lifestyle' events that allow the terms of a SalSac agreement to be varied - this not being one of them!

Thanks (4)
Replying to FactChecker:
By D V Fields
24th Apr 2024 21:54

You can use the net to gross qualifier on the employee record - which is then used in the payroll run. But it requires as far as I can tell the pension contribution rates to be pre-determined.

For example £3000.00n = pay net pay of £3,000. It will then determine the gross based on other pay items.

A manual calculation might be quicker.

Thanks (1)