Company charging me for opting out of auto enrolement pension

nicola261180

I am not expecting to get the the employers contribution that is not the question on my wage slip I have my total amount for the month my annual salry divided by 12, I then have a dduction of £30.08 being taken. Nothing more has been added This is still with the HR people so my manager is helping me now as she doesn't understand it either

Pal

The answer is:

• Instead of getting your salary plus a bunch of benefits, including pension, your employer converts your benefits into a cash amount and lets you use that salary supplement to choose your benefits, including taking it as cash if you want.
• The salary supplement includes the employer's pension contributions that they would pay if you were a member of the pension scheme.
• It is illegal for a company to incentivise people to opt out of pension saving, for example, by offering to pay you the employer contributions as cash if you choose to opt out.
• As a result, as you have opted out, your employer has to reduce your salary supplement by the amount of the employer's contributions so that you don't benefit from them in your pay.
• They could just show this on your payslip through a reduced salary supplement. Instead they are showing it as a negative deduction on your payslip. I suspect that this might be to demonstrate the value of the company contributions that you are throwing away by not being a member of the pension scheme.

Whether the deduction is exactly 1% of your basic pay depends on what definition of pay they use to calculate your pension contributions. For example, it might include overtime, bonus or commission payments, or may be total pay including salary supplement less an offset of some description.

Ask your payroll team to explain how they have calculated the offset so that you are sure it is correct. I they are using decent payroll software then I doubt it is wrong.

Cheers.

Your_Hero

Pal wrote: »

The answer is:

• Instead of getting your salary plus a bunch of benefits, including pension, your employer converts your benefits into a cash amount and lets you use that salary supplement to choose your benefits, including taking it as cash if you want.
• The salary supplement includes the employer's pension contributions that they would pay if you were a member of the pension scheme.
• It is illegal for a company to incentivise people to opt out of pension saving, for example, by offering to pay you the employer contributions as cash if you choose to opt out.
• As a result, as you have opted out, your employer has to reduce your salary supplement by the amount of the employer's contributions so that you don't benefit from them in your pay.
• They could just show this on your payslip through a reduced salary supplement. Instead they are showing it as a negative deduction on your payslip. I suspect that this might be to demonstrate the value of the company contributions that you are throwing away by not being a member of the pension scheme.

Whether the deduction is exactly 1% of your basic pay depends on what definition of pay they use to calculate your pension contributions. For example, it might include overtime, bonus or commission payments, or may be total pay including salary supplement less an offset of some description.

Ask your payroll team to explain how they have calculated the offset so that you are sure it is correct. I they are using decent payroll software then I doubt it is wrong.

Cheers.

I would think this is the most plausible explanation of what's happened.

As for the 1%, it is 1% of the 'Qualifying Earnings' which is a technical term in auto-enrolment. Employer contributions only relate to your salary in between the thresholds of £5,772 - £41,865.

So 1% of £36,093 is £360.93, or £30.08 (rounded up) which is exactly the deduction on her wage slip.

jamesd

It's possible but if so it would probably be salary sacrifice and I'd expect the cash equivalent of 1% to be less because the employer would deduct the employer NI from the gross pay first. So I don't think that the numbers really do add up.

There's also the matter of us being told that the payslip gross pay is the agreed contractual pay, not that plus something else less a pension deduction.

It's a nice puzzle and hopefully we'll learn what the answer is eventually.

SomeUser

From the sounds of it, this is a poorly designed flexible benefits scheme. (Pension contributions can be given to employees as cash as part of a flexible benefits package, but there's lots of things to be mindful of from an employer's point of view).

From your most recent payslip, take the total gross earnings (after the deduction) and multiply by 12 (if paid monthly). Provided you don't have any other salary sacrifice/flexible benefits adjustments, you'll mostly likely find that the total is your contracted annual pay.

nicola261180

Just to let you know that this is something that I should have been made aware off when I started, as part of my benefits the 1% is built in so as I am opting out they remove this. I am happy they have explained this now and they have refunded me 3 months worth for not explaining clearly enough. Hopefully I will be made permanent and then I will opt in to the pension. Thanks everyone for your help.

Your_Hero

nicola261180 wrote: »

Just to let you know that this is something that I should have been made aware off when I started, as part of my benefits the 1% is built in so as I am opting out they remove this. I am happy they have explained this now and they have refunded me 3 months worth for not explaining clearly enough. Hopefully I will be made permanent and then I will opt in to the pension. Thanks everyone for your help.

That is as we'd suspected and it makes perfect sense now. Thanks for letting us know.


In which case, it would make no sense not to join it? You are still paying that 1% whether you join or not.

nicola261180

I would need to put a minimum of 2% in when I join and at the moment whilst I do my house up, I have budgeted every penny but it will be early next year when we finish and by then I am hoping to be made permanent. I have 9 months left on my contract so if I was to join I would have a tiny pot whilst I have another pot with another company from my previous employment. It is something I am prepared to do and when my other child starts school next year I will be using the money over from childcare to go into my pension. Again thanks for all your help