Set up auto enrolment for your existing Xero Payroll

If you are already using Xero Payroll, and just need to set up auto enrolment, you can do this before you inform your staff about auto enrolment and before you process your next pay run.

Set up your organisation

  1. From the Settings menu, select Payroll Settings.

  2. Click the Workplace Pension tab.

  3. Add a Staging Date if doesn’t already appear.

    Xero may prompt you to import your staging date. You can also click the icon then click the link to find and verify your date.

  4. (Optional) If you want to postpone assessment by up to 3 months, enter a Workforce Postponement Date. Xero will automatically add this date to all your employee records. If you do postpone you can go straight to inform your staff about automatic enrolment.

  5. Enter information for:

    • Pension admin details. This includes Signatory Information for Auto Enrolment if you choose to postpone auto enrolment assessment.

    • Payment accounts.

    • Pension filing due dates.

    • Pension details.

  6. Enter your Payment Defaults, which will apply to all your employees by default. You can customise them for each employee in their individual pay templates.

    • Choose a Pension Type. Either:

      • Net Pay Arrangement - This option gives you two further options of either a normal pre-tax pension pay item, a deduction which is taken from salary before tax is calculated, so tax relief is already applied, or a salary sacrifice pay item, a deduction from gross earnings which is taken from salary before tax and NI are calculated. Tax relief is already applied.

      • Relief At Source - This option creates only a post-tax pension pay item, a deduction which is taken from salary after tax and NI are calculated. Tax relief is applied via the employee’s percentage field.

    • Tick the 'Yes' checkbox for Calculate on Qualifying Earnings if the pension you have set up uses only employee earnings between the NI bands, Lower Earnings Limit (LEL) and Upper Earnings Limit (UEL), for calculation.

    • Complete the Employee's Contribution fields:

      • Tick the checkbox for % of Gross.

      • If you have chosen a Net Pay Arrangement, set the Percentage at 1%. If you have chosen a Relief At Source contribution, the basic rate of tax (currently set at 20%) should be taken from the percentage. This means you should set the Percentage at 80%. Relief At Source pension schemes take 20% directly from HMRC as tax relief for the employee.

      • Select your Liability Account.

    • Complete the Employer's Contribution fields:
      • Tick the checkbox for % of Gross.

      • Set the Percentage as 1%. Xero creates a benefit pay item for employer pension contributions using the value entered here. Relief At Source arrangements have no effect on the employer percentage so this value does not reduce.
      • Select your Liability Account and Expense Account.

      Employees and employer percentages can be higher than current minimums and are set to rise from April 2018.

      The Pensions Regulator (The Pensions Regulator website)

  7. Click Save.