With salary sacrifice pension arrangements, the employee no longer contributes directly to their pension scheme. The employer contributes at least the amount sacrificed by the employee and can also make their own contribution. If you haven't already checked, contact your pension provider before you set it up in Sage 50 Payroll. This is to ensure you can run a salary sacrifice pension scheme with your provider. For further information about salary sacrifice pensions, visit the HMRC website.
Set up salary sacrifice pension scheme - Go to Company then Pension Schemes.
- In the Enrolment Review Date box, enter the date you next need to review your pension schemes for automatic enrolment.
 NOTE: This is for information only in Sage 50 Payroll. If you're unsure what to enter, contact your pension provider. - Select a pension scheme to set up, then Edit.
- Complete the fields in the Details tab.
▼ View details of each field | Reference | The pension scheme reference is a number used to identify the scheme. | | Description | Enter a name for your pension scheme here, using a maximum of 30 characters. | | Type | From the drop-down list, click the type of scheme. | | SCON (Scheme Contracted Out Number) | Leave this blank. The SCON is no longer a requirement. | | Qualifying Scheme | If the scheme meets The Pension Regulators criteria to be an automatic enrolment pension scheme, select this check box. | | Use Qualifying Earnings for pensionable pay | To calculate pension contributions using qualifying earnings thresholds, select this check box. For more information on qualifying earnings, visit the what settings affect calculate pension contributions article. | | Scheme minimum contribution (Total of Ee and Er) | This updates automatically if you enter a value in the Minimum Contribution (period) boxes on the Employee and Employer tabs. | | Minimum Employment Period (Months) | If the scheme is a qualifying scheme for automatic enrolment, leave this section blank. You need to postpone the employees instead to apply a minimum employment period. | | Salary Sacrifice Scheme | Select this check box. | | Stakeholder Friendly | This check box is only available if you choose a COMP or COMB type of scheme. If your pension scheme has stakeholder rules applied to it, select this check box. |
Check your pay elements Ensure that you set your pay elements as required to include them in the pension calculation. - Go to Company, then Pay Elements.
- Select the pay element you need to edit and select Edit.
- Select the checkbox This payment is subject to Salary Sacrifice (Pension Only) for each required pay element.
NOTE: You can't include factored pay elements in Salary Sacrifice pension calculations. To be compliant with the national minimum wage (NMW), an employee can't sacrifice an amount that reduces their gross pay below the NMW.
Assign the pension scheme If you use the Pensions Module, you can process the employee's next payroll as normal. When you run the Pension Assessment, it enrols eligible employees. If you don't use the Pensions Module, add a pension scheme to an employee's record manually.
Process the employee's pay - The Payments window displays the amount of their normal salary
- The bottom line displays the amount of the salary sacrifice and the employee's gross pay reduces accordingly
- In the Summary tab the columns beside Pre-Tax Payments, Taxable Gross Pay and Total Gross Pay display the reduced amount
- The Employer's window displays the sacrificed amount of the employee's pension and if applicable, includes the amount of the employer's contribution
▼ Click to view an example. An employee has a monthly salary of £2500 and decides to sacrifice 10% of this to the pension scheme. The employer also decides to contribute 10% to the pension scheme. This means the employee's gross pay reduces by £250 and the employer contributes £250, making a total pension contribution of £500. In Enter Payments, the following values appear: - The Payments window displays the normal salary of £2500
- The bottom line displays £250 for the salary sacrifice and £2250 for the employee's gross pay
- The Summary window displays £2250 in each of the columns beside Pre-Tax Payments, Taxable Gross Pay and Total Gross Pay
- The Employer's window displays £500 beside Pension (Current)
The payslip displays: - The employee's normal salary of £2,500
- Salary Sacrifice as a negative amount of -£250
- Earnings for NI for the reduced amount of £2250
- Gross for Tax for the reduced amount of £2,250
- Total Gross Pay for the reduced amount of £2,250
Pension reports in your software include the employee's full pay, or reference salary. Any legislative reports that show the gross pay, for example, P11 Deduction Card (PAYE Details), show the post sacrifice amount. In this example, that's £2,250.
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