Just to comment on the configurability of Qualifying Earnings (QE) in pay elements:

The TPR clearly defined which pay element types are QE, but does not prescribe the description as appears on a payslip of those elements, plus you may have more than one pay element for a type (eg overtime could have different rates: time and a quarter, half or double time - each is overtime and a monthly payee could get different overtime rates at different times during a month).  Further there are other possible pay elements which do not count towards QE but the TPR does not define those!  Instead of having a "type" indicator for each pay element which would require you to specify the pay element is of type "salary", "bonus", etc, Sage has a single QE criteria check box which is future proof against other types being added to the TPR list.

There are also two pay values to consider:

Qualifying Earnings (QE) - the amount used to decide on auto-enrolment; and

Pensionable Income (PI) - the amount on which pension contributions are based.

As I understand it:

Sage uses the QE criteria of a pay element to decide whether that pay element contributes towards the check against the auto-enrolment thresholds or not.  This provides their QE as a legal basis for requiring auto-enrolment.

Unless the scheme has the "Use QE for pensionable pay" criteria set (in which case Sage uses the QE amount above as the PI) Sage uses the Pension (Main) criteria of a pay element to decide whether that pay element contributes towards the total amount against which pension contributions are calculated.  This provides their PI as a basis for calculating their contributions as per their enrolled scheme's instructions.

[This can lead to situations (which seem strange to me) whereby a pay element is considered as earnings when checking whether an employee should be auto-enrolled but not considered when calculating the actual pension!  (Though the TPR seems to allow this, see: https://www.thepensionsregulator.gov.uk/en/employers/managing-a-scheme/contributions-and-funding).]

[If they are earning £1,000 in a month then they are above the upper threshold (currently £833 per month) and should be auto-enrolled in a (qualifying) scheme.]

What I don't quite understand is why you want to subtract the lower threshold for auto-enrolment checking from their gross pay to get an employee's PI (as if calculating Tax or NI) on which the contributions are then calculated.

The pension scheme provider will define on what pay the contributions are based, and I can't think of any reason they would specify the excess of an employee's gross pay over the lower auto-enrolment threshold as their PI.

Our pension providers use percentages based on an employee's full gross salary (the £1,000 in your example), not their excess over the lower auto-enrolment threshold (the £480 in your example).

Are you really sure that is the scheme's definition of PI?

Disclaimer: I am not a solicitor, take proper legal advice regarding pension contributions.

Thanks for replying Robert. I agree it's confusing that TPR uses the term "qualifying earnings" for two different things - 1) the earnings used for the assessment of whether someone needs to be enrolled and 2) the earnings used for the calculation of statutory minimum contributions. For clarity, it is use (2) that is relevant to this thread and specifically how the QE earnings band affects the pensionable pay that should be reported by payroll.

Here is an article from the Nest website explaining how the QE band affects pensionable earnings: https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/calculate-contributions-using-qualifying-earnings.html. The example they give is of a weekly worker earning £200, and they calculate the pensionable pay to be £80 (£200 minus the weekly lower QE threshold of £120). I hope this helps to clarify why the lower QE threshold is subtracted from what the pension provider considers to be pensionable pay. 

This isn't just Nest's approach - here is an extract from Smart Pension's data specification (which is what Sage's PAPDIS report is based on) explaining how qualifying earnings (band earnings) should impact what is reported as pensionable pay: 

You mentioned that your pension provider uses full gross salary to calculate the contributions and that is fine - it is perfectly legal for any employer to choose an alternative contribution basis (there are 3 certification sets that can be chosen from, and these allow the employer to use alternatives such as basic pay only or total gross earnings). But to be clear, my question specifically relates to schemes where the employer has chosen to use the qualifying earnings band to calculate contributions and ticked the Use QE for Pensionable Pay box in Sage to indicate this.

The specific problem my clients are reporting is that the Pensionable Pay is still reporting as total gross even with this box ticked.  

Thank you...you learn something new every day!

I've had a little play with the demonstration data to understand better what's going on.

I created and assigned a pension scheme to use QE and I noticed that it has the gross as per gross (for the payslip), but has calculated the pension contributions based on the gross less the lower QE - so Sage does know to calculate on the lower figure.

So the problem arises from how the data is exported for import.

Unfortunately there doesn't seem to be a way that I can create the PAPDIS report (from the demo data) to see how it does what it does.  I am assuming you create a CSV file for import either by a process (eg via Pensions Module) or use the EXPORT option of a report.

If it is a report you might be able to change the data field that defines the pensionable income to a different variable that gives the excess over the lower QE (through a bit of trial and error I seem to have found one - the Report Designer documentation leaves a lot to be desired).

If it is not a report but a process, then whoever set up the process seems to have set it up wrong; in this case it is a bug that Sage (assuming it's a Sage module/process) ought to fix.

If you know that everyone in the report is going to have some contributions (by dint of being in excess of the lower QE), then as a workaround you could import the CSV into a spreadsheet (eg excel), adjust the Pensionable Income (using a macro to subtract the relevant current lower QE) and re-export as a csv - I agree this is quite a faff.

Hi Robert, the behaviour you describe is the same in the PAPDIS report in that the actual contribution amounts are correct. It is just the Pensionable Earnings figure that is wrong (same as on the payslips from what you describe). The problem with reporting Pensionable Earnings = total gross earnings is that it confuses the pension providers' contribution validation. 

Nest and Smart Pension both look at the Pensionable Earnings figure supplied by payroll, multiply it by the contribution % rates and check that the contribution amounts are at least the minimum required. 

To extend the £200 a week example:
- The correct minimum employee contribution is £80 x 5% x 80% = £3.20 (net of BRT, assuming it is a Relief At Source scheme)

- The Sage file reports the pensionable pay as £200

- Nest bases its validation check on this - so works out the minimum employee contribution as £200 x 5% x 80% = £8

- Nest incorrectly rejects the £3.20 contribution because it deems it to be less than the statutory minimum amount

I've tried explaining this to Sage but haven't gotten very far. Do you know how I can raise it so that they might fix the problem?

For your reference, the PAPDIS report I've referred to is available by request from Sage. This video shows where you access it from once installed: https://www.youtube.com/watch?v=kp2ZRWQ60ZQ

My clients are using PAPDIS files to manage a range of pension providers including Nest, The People's Pension, Smart Pension, NOW:Pensions and Aviva via PensionSync, which converts the PAPDIS data file to the providers' specific requirements and delivers it via an API link. 

Our providers don't use such a report so we don't need it.

As it is a report there is a possibility of changing the variable of the data field that contains the Pensionable Income.

If you edit that report file (which we haven't got) you may find it is just a list of fields (as it is designed for export to CSV not readable report).

If it is just a list of fields there may be one accessing the variable: Updated.Pensionable

If there is changing it to access the variable Updates.QualifyingEarningsBelowAEThreshold

should hopefully change it to use the gross less the lower QE instead.

That's extremely helpful, thanks Robert. 

That variable I found by a bit of guessing and fiddling around to see what happens (using the Demo data), and it seems to hold the gross less lower QE - I haven't fully tested it to see what happens with different pay levels.

[I'm much more au fait with Pick databases and struggle to get my brain around the underlying SQL access to the Sage data.]

OK, thanks Robert. I'll bear that in mind and discuss with the clients. We don't do the payroll ourselves but we can pass on your wisdom and hopefully help the payroll clients to find their way.