Set up auto enrolment as part of payroll onboarding

If you are new to Xero payroll, you can set up auto enrolment as part of the onboarding process inform your staff about auto enrolment and before you process your first pay run.

Set up your organisation

If you are connecting to Pension Sync for NEST or the People's Pension, we recommend watching these short videos about setting up.

  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 on the small information icon 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. The date you enter in this field will be automatically added 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. You can select one of the listed pension providers or 'Other' if you don't see your pension provider, or if you don't wish to electronically submit.
  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.

  7. 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.
  8. 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.
  9. 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.
  10. 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 is not reduced.
    • Select your Liability Account and Expense Account.

      Percentages for employees and employers can be higher than the current minimums and are set to rise from April 2018.

      The Pensions Regulator (The Pensions Regulator website)

      Image showing payment defaults

  11. Click Save.

When you make updates to the Payment Defaults or Pension Name in the Workplace Pension tab, Xero updates any associated current pay items automatically. This means that employee pay templates containing these pay items will also update automatically unless you have previously changed contribution amounts for specific employees manually.

If you want these pay templates to include changes from the Workplace Pension tab in future, remove the pension pay item from the employee's pay template and add it back without changing the contribution amount.

Set up your employees in Xero

Enter your employee details so that you have the correct pension deductions and opening balances set up before you inform your staff.

Set up your employees