Add employee pension contributions

Deduct a pre or post-tax pension contribution from an employee's pay when an employee wants to contribute an amount that's different from the auto-enrolment amount.

Mark employee as currently in a pension scheme

  1. In the Payroll menu, select Employees.
  2. Click the Pension tab.
  3. Select 'Yes' under Currently in a Pension Scheme?.
  4. Click Save.

Set up employee pension

If an employee pension pay item has already been set up, skip the setup and start adding the contribution to an employee’s pay template.
  1. In the Settings menu, select General Settings.
  2. Under Features, click Payroll Settings.
  3. Click the Pay Items tab.
  4. Click Deductions, then click Add Deduction Type.
  5. Under Deduction Category, select the deduction type you want to set up:
    • Pre-Tax Pension for contributions taken before taxes
    • Post-Tax Pension for contributions taken after taxes
    • Student Loan Deductions
    • Child Care Voucher
    • Salary Sacrifice
    • Other
  6. Enter a name for the deduction. This name appears in Xero and on employee payslips.
  7. Select a calculation type and enter an amount.
  8. Select the liability account for the pension contributions.
  9. (Optional) Select any additional checkboxes that apply for the deduction type you are setting up, such as:
    • Calculate on Qualifying Earnings
    • Reduce by PAYE Basic Rate
    • Calculate on Qualifying Earnings
    • Reduces Pensionable Earnings
    • Is a Pension Scheme Deduction
    • Deduct before PAYE tax
    • Deduct before National Insurance contributions
  10. Click Add.

Add employee pension deductions to an employee's pay template

After setting up an employee contribution pension amount, you'll need to add it to the employee's pay template to automatically deduct the contributions from their pay each pay period.

  1. In the Payroll menu, select Employees.
  2. Click the name of an employee to add pension contributions to.
  3. Click the Pay Template tab, then click Add New Deduction.
  4. Under Deduction Type, select your pension name from the list.
  5. Select a Fixed Amount or % of gross calculation type.
  6. Enter your employee’s pension contribution amount.
  7. Click Save.