Pensions - The Book-keepers Forum (UK)

Hopeful · Veteran Member

Pensions

BackOfficeGroup · Guru

The employer contribution is an additional element to the payroll. The employee element is included in the gross pay and deducted from the salary. On entering the payroll journals, put the employee pension onto the BS, say code 2230, as a deduction from the employee, then when the payment is made at the bank, it will contra this entry.

For the employer contribution, make a journal entry again using CR2230 and DR6340, and then once paid via the bank, it will contra the entry on 2230 again.

Hope that all makes sense.

P

Hopeful · Veteran Member

Thank you for your help, I get the employer bit it was the employees contribution I struggled with, just so I understand by posting will be
DR 7000 gross 5700 salary + 291.20 pension
Dr 7006 NI 631.30
CR 2210 paye 998.62+1379.87
CR 2220 net pay 3661.61
CR 2230 pension 291.20

Then I pay the employee out of the bank £3661.61 not sure I follow the payment out of the bank since he will only get net pay?

Sorry I don't think I'm getting it....new to payroll carries on like this I'll not be doing it for long!!

Rhianrach · Expert

Hopeful wrote:

Thank you for your help, I get the employer bit it was the employees contribution I struggled with, just so I understand by posting will be
DR 7000 gross 5700 salary + 291.20 pension
Dr 7006 NI 631.30
CR 2210 paye 998.62+1379.87
CR 2220 net pay 3661.61
CR 2230 pension 291.20

Then I pay the employee out of the bank £3661.61 not sure I follow the payment out of the bank since he will only get net pay?

Sorry I don't think I'm getting it....new to payroll carries on like this I'll not be doing it for long!!

You pay the net to the employee cr bank dr 2220, ni and paye to hmrc cr bank dr 2210, and the pension to the pension company cr bank dr 2230.

Hopeful · Veteran Member

Oh ok I get it now....der! it didn't cross my mind I had to pay the pension company!!! I'm beingining to think payroll is a nightmare! does it get easier?

semsley · Guru

Not quite sure what you are asking but for employer pension (no employee contribution) the postings would be:

Dr Gross Pay with salary (7000)
Dr Employer's NI (7006)
Dr Employer's Pension (7007)

Cr Net Pay with salary less deductions (2220)
Cr Paye (2210) with paye and employee & employer NI
Cr Pension (2230) with pension payment

(when all has been paid all the 2000 codes [liabilties] will be zero).

For employee contribution to pension.

Dr Gross Pay with salary (7000)
Dr Employer's NI (7006)
Dr Pension with pension payment (2230)

Cr Net Pay with salary less deductions (including pension contribution) (2210)
Cr PAYE (2210) with paye, employee & employer NI
Cr Pension (2230) with pension payment

Hopeful · Veteran Member

Thank you all for your help, I've just taken over from someone else and I'm have some trouble getting any help from them,

I think I need to check the paperwork for the pension, I was led to believe the DD payment was for Employers only, I now think it is for both....which is why I was having trouble getting my head round it all....anyway another lession learned moving onwards and upwards - happy days.

Bev

BackOfficeGroup · Guru

When you pay the net pay, you will post it to 2220, and likewise for the PAYE, you will pay on 19th and post to 2210. The pension on DD will then get posted to 2230, which will have the effect of taking those balances to zero - then you know you have paid correctly.

With regard the the pension contribution, it can be just the employers and can be for both employer and employee, it all depends on how it has been set up. If the 291.20 includes both, you will need to post the employer part only to say 7007? to be shown as a seperate item on the P&L. The employee part will be included in the gross pay.

The question is, is the 5700 gross wages before the deduction or after?

P

Hopeful · Veteran Member

Hi P thanks for the post, the 5700 gross is before the deduction, I'll need to send an email to the pension company I think to clarify, nobody back in the office has told me to make addition payments to them so I'm assuming the DD is for both??

Bev.

semsley · Guru

How does the pension company know how much to take in DD each month?

I ask this because I do a pension payment which used to be employee only but now is part employer and part employee. In order for the pension provider to collect the correct amount each month (and for them to allocate it correctly) I have to go on line to the provider and let them know the contributions and when they were deducted from salary.

Hopeful · Veteran Member

Other then sending an email to find out I have no idea, I've only been with the company a couple of weeks and as I said I'm new to payroll, another employee has joined the pension and the provider has told her how much she is to have deducted each month....what would you suggest??

semsley · Guru

another employee has joined the pension and the provider has told her how much she is to have deducted each month....what would you suggest??

If the provider has told the employee their contribution, it suggests that the employee contributes but still does not tell you whether or not the employer does.

Can you not ask your employer? Or alternatively does the company have an employee handbook which sets out all the terms and conditions of employment which would show pension contributions as a percentage employer/employee from which you could work out the contributions based on annual salary.

Hopeful · Veteran Member

I can ask the question, I'll still sent an email to the provider they should have the answers I need and yest the company doe's have a handbook. thank you for all your advice much appreciated.

Bev

BackOfficeGroup · Guru

If the pension contribution is for the employee only, the pension provider will not talk to you, however if it has been set up that you are making both contributions, they will happily talk to you. Many pension co's send out monthly statements of the DD they will collect, others don't.

P

Hopeful · Veteran Member

Hi P I contacted the provider he has confirmed it is for both & given me a break down, I get a monthly statment but it only tells me how much is being taken out.