Select whether the employee is in a pension scheme:
If No, Xero assesses the employee for auto enrolment, and adds pension pay items to their pay template.
Defer for auto-enrolment
Leavers
Information required from the employer
Last day of employment
Any holiday accruals
Any redundancy payments
Any other deduction (ie - season tickets loan, laptop purchase etc)
Salary changes
Commission
Bonus
Salary increase or decrease
Pension contribution changes
In the UK, all employees aged over 22 years old and earning a minimum of £10k a year are opted in to pension contributions, unless they opt out.
If they are under 22 or earning less than this amount, you can ask the employee if they’d like to voluntarily enrol or “opt-in”.
If they opted out within the first month, the employee will be able to get the money back. If they opted out after that, they can't get the money back but no more contributions will be made to their pension fund.
An employee can defer their enrolment for 3 months after joining the company. If they choose to defer, you must send them a postponement letter. This is automatically generated in Xero under the pension section. After 3-months they must be enrolled.
When adding an employee in Xero, Xero will automatically prompt you to enrol them in the pension scheme if they have not been deferred. If they have been deferred Xero will automatically ask you to enrol them in 3 months time when processing pay-run.
When employees are enrolled, you must send them a pension eligibility letter. This can be found in Xero once the pay-run has been processed under the employees name and under the pension tab.
On occasion, employees may want to increase their pension contributions or to opt out of pension
Review PAYE Payable account by comparing to the amount due per the HMRC business account
Review Pensions payable by comparing to the amount due per your pension provider
What can go wrong?
Employees can be duplicated if the payroll IDs are incorrect
Next steps
Cyclescheme
Some startups will have a cyclescheme where an amount is deducted from the employee’s gross pay - which means it’s tax efficient for them to purchase a cycle through the cyclescheme since their PAYE and NIC will be lower.
The employee deductions are inclusive of VAT and emploeyrs are expected to pay over to HMRC the VAT included in the payments received.