Settings that affect pension calculations

This is the total value of an employee's payments used to calculate their pension contributions.

For example, an employee's gross pay includes a £900 pensionable salary payment, and a £100 non pensionable bonus payment. The total gross pay is £1000 but the pensionable pay is £900.

TIP: To check if your pay elements include your pension calculation, use our setup your pay elements for pension contributions article.

To check the pensionable pay for any period including the current one, use the following reports.

When you reconcile an employee's pension contributions, you must use the contribution rates set in their employee record in your calculation. Employee contributions use separate rates to those for employer contributions.

You can check these rates using the steps below:

1. On your employee list, double-click the relevant employee.
2. Go to the Pensions tab, then select Manage Schemes.
3. Choose the pension scheme to check, then click Edit.
4. In this window, check the Employee Contributions and Employer Contributions.
   TIP: If you set a Fixed Amount, your software uses this value as the pension contribution.

This means that the scheme calculates pension contributions for employees before or after tax.

Let's see how this setting affects an individual whose employee contribution rate is 5%.

• If you select Deduct Before Tax, the employee's full contribution rate deducts in the pension calculation, in this example that's 5%
• If you don't select Deduct Before Tax, the basic rate of 20% tax is used in the employee's pension contribution. This means that only 80% of the employee's contribution rate is deducted in payroll. In this example, the employee contribution calculates at 4%
  TIP: The Deduct Before Tax checkbox doesn't affect the employers contribution rate.

To check this setting on your pension scheme:

1. Click Company, then click Pension schemes.
2. Select the pension scheme in question, then click Edit.
3. Click OK on the message that appears.
4. Go to the Employee tab, check if you've selected the Deduct before tax checkbox.

If this option isn't selected on your pension scheme, the software will use the total of your employees' pensionable pay in the pension calculation. When you select this option, the following thresholds apply:

• Earnings below the annual lower threshold of £6,240 aren't included in the employee's pension contribution
• Earnings above the annual upper threshold of £50,270 aren't included in the employee's pension calculation

Let's break down those annual thresholds into values for each pay frequency.

Next, check this setting on your pension scheme:

1. Click Company, then click Pension Schemes.
2. Click the pension scheme to check, then click Edit.
3. Click OK on the message that appears, the scheme then opens on the Details tab.
4. Check if you've selected the Use Qualifying Earnings for pensionable pay checkbox.
   If so, this means that the lower and upper thresholds apply in the pension calculation.