Re-invest National Insurance (NI) savings to employee's salary sacrifice pension

Summary

How to process NI savings into an employee's pension scheme in Sage 50 Payroll.

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 for employee and/or employer into the employee's pension scheme.

Resolution

From v31 of Sage 50 Payroll, your software can automatically add the employer NI saving to the employee's pension.

TIP: Visit our how the 'add employer NI savings to pension contribution' feature works article if you'd like to learn about the calculation.

If you'd like to reinvest employee NI savings too, calculate the new employee contributions and amend this manually each period.

Directors - 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 both pro-rata and annual basis 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.

NOTE: If you want to reinvest less than 100% of the NI saving, you need to calculate it manually. Whether it's for a director or employee, calculate the amount then follow the employee NI re-investment section to process it

Re-invest employer's NI function

From v31, you can reinvest the employer's NI saving simply by selecting an option on the pension scheme.

NOTE: This feature applies to all employees on the scheme you edit. You can't apply this setting to individual employees on a pension scheme you've assigned to multiple employees.

Click Company, then Pension Schemes.
Select the scheme you need to update and click Edit, or if applicable, create a new scheme.
Select the Add Employer NI Savings to pension contribution checkbox.

Your software now automatically reinvests the employer NI saving that the salary sacrifice scheme creates. You don't need to make any changes each period that you process, and the extra contribution continues each period.

Employee NI re-investment

Sometimes, the employee may wish to reinvest their NI savings too.

As an alternative to the manual workaround below, consider discussing the option to increase their employee pension contribution rate instead. This doesn't increase their contributions by the amount of NI they save, but it does still increase their overall pension contribution.

If you agree this change, follow the amend pension contributions article to update their contributions.

If you're only processing the employee NI re-investment, follow the workaround below. If you're also reinvesting the employer NI saving, follow the reinvest employer's NI function and the employee NI workaround below.

TIP: Ensure you keep clear notes of each value and what it is while you complete the workaround below.

▼ Re-invest employee NI savings workaround.

Calculate the NI Saving

Your first step is to calculate the NI saving, so you can add it to the normal pension contribution. Note the NI due with their normal pension contribution, and with no pension contribution. The difference between these values is the NI saving you need to add to the employee's pension contribution.

Let's run through that step by step.

Select the required employee then click Payroll.
Click Change Process Date, set the pay date you're processing next and click OK.
Click Enter Payments and check the payments are correct.
Click the Summary tab.
Make a note of the Employee's National Insurance value under the Current column.
Click the Employee button in the top left of Enter Payments to open the employee's record.
Click the Pension tab then click Manage Schemes.
Select the relevant pension scheme and click Edit.
Next to Employee Contributions, take note of the value entered then set it to 0.00.
Click OK, then Close.
Click Save, then Close.
- This takes you back to the Summary tab of Enter Payments
Make a note of the National Insurance value now due. Deduct the value noted in Step 5 from this the value to calculate the Employee NI saving.
Open the employees record then click the Pension tab.
Click Manage Schemes, select the relevant scheme and click Edit.
Set the employee contribution back to the normal amount that you noted in Step 9.
Click OK, then Close.
Click Save then Close.

Note the normal pension contributions

Next, note the employee's pension contribution for the period.

Open Enter Payments and check the payments are correct.
In the Payments tab, note the Employee pension contribution amount under the heading Salary Sacrifice.

Calculate the contributions including the NI savings

You've now calculated how much Employee NI the employee saves by being on the salary sacrifice pension scheme, and their normal pension contribution.

Add the employee NI saving to the employee contribution. This is the new employee contribution for this period. Keep note of this value.

Process the updated contribution

You're now ready to process the contributions including the NI savings.

Double-click the relevant employee.
Click the Pension tab then Manage Schemes.
Select the relevant pension scheme and click Edit.
On the pension details tab, click the drop-down menu and select Fixed Amount for Employee contributions.
Enter the new contribution amount in the field to the right of Fixed Amount.
Click OK, then click Close.
Click Save, then Click Close.

You can now continue to process Payroll as normal.

You must recalculate the NI saving each period that you process this arrangement, to ensure it remains correct.

Solution Properties

Solution ID: 200427112600616
Last Modified Date: Wed Aug 06 11:50:56 UTC 2025
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