Set up pension salary sacrifice in QuickBooks Online Advanced Payroll

A salary sacrifice scheme is usually an arrangement that is made between the employer and the employee. Once agreed upon, the employee can exchange a part of their gross salary for noncash benefits like pension contributions and more.

By using the scheme, both employer and employee can save money on National Insurance (NI) contributions. Here's how you can set up salary sacrifice in QuickBooks Online Advanced Payroll.

Set up salary sacrifice without qualifying earnings Advanced Payroll

1. Go to Payroll and then select Payroll Settings.
2. Select Pension settings.
3. In Contribution Plans, select Add.
4. Give the new plan a name.
5. Enter the contribution group ID.
6. Select the Pension Type.
7. Select Yes if this is an auto-enrolment scheme.
8. Tick the box to calculate pension on qualifying earnings.
9. Enter 0% in the employee contribution field.
10. Enter the Salary Sacrifice percentage.
11. Enter the contribution percentage in the Employer Contribution field. This is normally 3% depending on how this is set up in your pension settings.
12. Enter the NIC Rebate percentage.
13. Save.

Set up salary sacrifice with qualifying earnings in Advanced Payroll

1. Go to Payroll and then select Payroll Settings.
2. Select Pension settings.
3. In Contribution Plans, select Add.
4. Give the new plan a name.
5. Enter the contribution group ID.
6. Select the Pension Type.
7. Select No in 'Is this scheme an auto enrolment scheme?'.
8. Enter the lower and upper earnings amount manually.
9. Select LEL Offset.
10. Select UET Offset.
11. Enter 0% in the employee contribution field.
12. Enter the Employer Contribution percentage. This is normally 3% depending on how this is set up in your pension settings. 
13. Enter the Salary Sacrifice percentage.
14. Enter the NIC Rebate percentage.
15. Select Save.

What happens next

You'll need to manually assign the new contribution plan to the employee(s) and make sure to set their assessment status to Eligible job holder.

That's it! You don't need to change any of the other settings. Once set up and assigned, QuickBooks will calculate the pension contributions after applying the qualifying earnings.

Something not quite right?

Here are some common tips to get things back on track. Be sure to check the following if: 

Employer contribution is calculating too high

• Make sure you set up Impact on pensionable earnings to Reduces Pensionable earnings in the Pension Salary Sacrifice Deduction category
• Make sure the contribution percentage is correct
• Check that you are using the correct pension contribution plan

National Insurance contribution is calculating too high

• Check to see that NI calculation impact is set up to Reduce Pensionable earnings in the Pension Salary Sacrifice Deduction category

Pension contribution isn't calculating correctly when using qualified earnings

• Make sure you're using the correct contribution plan
• Check that the pension plan is set up as non-auto enrolment
• Make sure both Lower earnings and Upper earnings are entered correctly
• LEL (Lower Earnings Limit) and UET (Underpayment of Estimated Tax) are set to offset