Solution Properties
Solution ID:
250219081309377
Last Modified Date:
Mon Feb 24 08:12:52 UTC 2025
Taxonomy Path:
Case category//How do I...//processing
Author:
[email protected]
How the 'add employer NI savings to pension contribution' feature works
Description

A salary sacrifice pension scheme deducts the pension contribution from the employee's gross pay, before tax or NI. This means that both you as the employer, and your employee could pay a lower amount of NI with this type of pension scheme.

Some pension providers allow the re-investment of the NI saving into the employee's pension scheme.

Cause
Resolution

From v31 of Sage 50 Payroll, your software can automatically re-invest employer National Insurance (NI) savings to an employee's salary sacrifice pension.

Important information

This feature works differently for employees and directors.

For employees, your software calculates the increase to pension contributions in each period you process.

For directors, this calculation only occurs in the final period of the tax year, and it covers the whole tax year. This is to ensure accurate contributions, as the director's NI calculation is cumulative in the final period of the tax year.

Calculation

NI saving

Your software completes several steps to calculate the NI saving to add to the pension contribution. Follow the steps below to run through how it works.

  1. Note the employee's gross pay before any deductions. You can check this in the Summary tab of Enter Payments.
  2. Note the total salary sacrifice amount. You can check this in the Salary Sacrifice section of Enter Payments.
  3. Check if the employee has more than one salary sacrifice pension scheme.
  4. If the employee has other salary sacrifice deductions, for example cycle to work, note the value of these.
  5. Manually calculate the employer's NI contribution based on their original gross pay that you noted in Step 1.
     TIP: For help with doing this, visit the employee NI calculations article.  
  6. Subtract the salary sacrifice amount you noted in Step 2 from the original gross salary you noted in Step 1. This is the employee's post sacrifice pay.
  7. Manually calculate the employer's NI Contribution based on their post sacrifice pay.
  8. Subtract the value you calculated in Step 7, from the value you calculated in Step 5.

Pension calculation

The next calculation varies a little, depending on whether the employee has more than one salary sacrifice deduction or pension scheme.

Select the relevant option below for your next steps:

▼ The employee has no other salary sacrifice deductions, only their pension scheme

In this case, calculate the employer pension contribution and add the NI saving to it.

  1. Calculate the normal employer pension contribution, based on the employee's pre sacrifice pay.
  2. Add the employer NI value you calculated in the NI saving section to the employer contribution you just calculated in Step 1. This is the total employer contribution including the NI saving.  
▼ The employee has more than one salary sacrifice pension scheme or deduction

An example of this scenario is if the employee has two salary sacrifice pension schemes, where one or both are set to reinvest the NI saving. Or, they have a salary sacrifice pension, and a salary sacrifice deduction such as cycle to work. 

In this case, you need to calculate what proportion of the total salary sacrifice value belongs to the salary sacrifice pension to be reinvested.

 NOTE: If the employee has more than one pension scheme set to reinvest NI savings, repeat the steps below for each of these schemes. 

Then, use this to calculate the NI saving relating to the salary sacrifice pension scheme. This is the value you then add to the employer pension contribution to establish the total contribution.

  1. Calculate the employee's salary sacrifice pension contribution amount.
  2. Work out what percentage of the total salary sacrifice is being reinvested. ▼ Click here to view an example.

    The employee has a salary sacrifice pension deduction of £300, and a salary sacrifice cycle to work deduction of £200 per month.

    These add up to £500, which is the employee's total sacrificed pay per period. However, only the NI saving from the pension of £300 applies to the pension scheme reinvestment. 

    The next step is to calculate what percentage the pension scheme is of the total amount sacrificed. In this example, it's 60%, as £300 is 60% of £500. The percentage in this example is 60%

  3. Take the overall employer NI saving and multiply it by this percentage, to work out the NI saving for this scheme.
  4. Calculate the normal employer pension contribution.
  5. Add the employer NI value from Step 3 to the employer contribution in Step 4. This is the total contribution including the NI saving.  

 

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