When processing NHS Pensions in Sage 50 Payroll, NHS Pension Tiers recommends a tier for each employee based on their annual salary information.

Your software calculates their annual salary using both the information entered within NHS Pension Tiers in the NHS Pensions module, as well as the information entered in Enter Payments for the employee and recommends a tier based on each of these. 

You must then select the required tier for each employee.

Let's run through how your software calculates annual salary.

Calculation based on NHS contract information

(Contracted hours x Hourly rate) x 52 = NHS recommend tier

Calculation based on payroll information

The following calculation applies whether the Previous year or Current year option is selected within NHS Pension Tiers.

NOTE: For these calculations, you must take any Hours, Rates or other pay figures from Enter Payments unless specified otherwise.

Monthly, Four Weekly & Fortnightly

Information taken from Enter Payments:

1. For each pensionable pay element - Hours/No x Rate = Amount.
2. Add together each of these total amounts.
3. Deduct any salary sacrifice, if applicable.
4. Find the average annual salary:
   • For monthly payroll, multiply this by 12.
   • For four weekly payroll, multiply by 13.
   • For fortnightly payroll, multiply by 26.
5. To find the average weekly pay, divide step 4 by 52.
6. For each pensionable pay element (from step 1), add together the values in the Hours/No column.
7. Find the average annual hours:
   • For monthly payroll, multiply this by 12.
   • For four weekly payroll, multiply by 13.
   • For fortnightly payroll, multiply by 26.
8. To find the average weekly hours, divide step 7 by 52.
9. To find the average rate of pay, divide the value at step 5 by the value at step 8.
10. Multiply this by the contracted hours.
11. Multiply this by 52.

Weekly

Information taken from Enter Payments:

1. For each pensionable pay element - Hours/No x Rate = Amount.
2. Add together each of these total amounts.
3. Deduct any salary sacrifice, if applicable.
4. To find the average annual salary, multiply this by 52.
5. For each pensionable pay element (from step 1), add together the values in the Hours/No column.
6. To find the average annual hours, multiply step 5 by 52.
7. Divide the value at step 4 by the value at step 6.
8. Multiply this value by the contracted hours.
9. Multiply this by 52.

For the answers to common questions regarding annual salary or the NHS Pensions module in general, please refer to this guide.