Example - UK Pension Payroll Policy

To work properly, your auto-enrolled pension scheme requires a payroll policy that includes rules to govern which earnings (allowances), deductions, and taxes are applied to employees, and the order in which they are applied.

Before You Begin: Make sure that you have set up the necessary allowance or deduction definitions for UK pension auto-enrolment before you create the associated payroll policy.

The payroll policy must have the following characteristics:

• It includes a rule using the Apply UK Pension Auto Enrolment Rule type.
• The rule using the Apply UK Pension Auto Enrolment Rule type references an employee allowance or deduction and an employer allowance or deduction. The rule can reference a mix of allowance and deduction; for example, the rule can include an employee deduction and an employer allowance. However, the rule can't reference both an allowance and a deduction for either the employee or employer.
• The rule using Apply UK Pension Auto Enrolment Rule must be the first rule in its ruleset.
• This ruleset must include all of the other required pay rules for UK payroll.

See Apply UK Pension Auto Enrolment Rule.

The payroll policy in this example is called "UK Pension Policy," and it includes a rule called "UK Pension AE" which uses the Apply UK Pension Auto Enrolment Rule type. This rule uses the allowances described in the related examples in this section.

Note: Auto-enroled pension schemes usually use allowance definitions with salary sacrifice that behave as deductions. If you need to use a pre-tax or post-tax deduction definition, Dayforce allows for that type of configuration. However, you can't include more than one type of definition for the employee or employer in the payroll policy. If you need multiple types of configurations, only one can be handled inside the auto-enrolment process; the rest must be handled outside of it using other payroll elections.

If you need more general information on how to configure payroll policies, see Payroll Policies.

The following table details the key settings of the "UK Pension AE" rule included in this payroll policy, and an image of this setup follows the table.

Key Settings for the UK Pension AE Rule

Setting	Example Setup
Type	Apply UK Pension Auto Enrolment Rule
Employee pension earning	Salary Sacrifice Pension - EE
Employer pension earning	N/A - no selection
Employee pension deduction	N/A - no selection
Employer pension deduction	Pension - ER Note: Only a Memo Calc type deduction can be used for this employer pension deduction.
Excluded earnings	N/A - no selection Note: Add excluded earnings as required here.
Calculate with full gross pay	Checkbox selected
Refund employee pension contribution after opt-out	Checkbox selected
Relief at source	Checkbox to select a tax relief option to reduce employee contribution at source for the basic tax rate.