Using Payroll Manager with NEST

Note: This guide has been designed to work with the latest version of Payroll Manager. The area of 'Auto Enrolment' is fast moving, and we are adding extra features / software modifications on a regular basis. We would encourage you to update your version of Payroll Manager before proceeding with this guide. (Click 'Help' then 'Program Update' from the main menu in Payroll Manager to update).

New legislation on workplace pensions ('Automatic Enrolment') brings many new duties for the employer. This guide is NOT designed to inform you of these new duties. You should consult with NEST and The Pensions Regulator website in order to fully understand what is required.

This guide is specifically designed to show how Payroll Manager can help with the Auto-enrolment process and is split into 7 sections:

1- Staging Date

Every employer has a date from when the automatic enrolment duties come into force for their business. This is called an employer’s 'staging date'. If you already know your staging date then enter it by clicking 'Employer' from the main menu, then 'Employer Details', then click on the 'Auto-Enrolment pensions' tab.

Staging Date

If you do not yet know your staging date then please refer to The Pensions Regulator website www.tpr.gov.uk/staging which includes a tool for finding this out.

The 'Auto-Enrolment pensions' screen also contains boxes where you can enter a 'Re-enrolment date' and a 'Deferment / postponement date'

Click 'OK' to save this information.

2 - Adding the NEST Pension Scheme details

Click 'Pensions' from the main menu, then click 'Pension Scheme Details'

NEST

The tabs along the top of this screen allow you to add the details of up to 5 different pension schemes. If you have employees that are paid at different pay frequencies (e.g. some weekly and some monthly paid employees) then you should create a separate pension scheme within Payroll Manager for each pay frequency.

Click on the first available tab along the top of this screen and enter the following details:

Tax Relief:

It is very important to set this correctly before proceeding as it has an effect on the calculation of all pension contributions.

Additional Voluntary Contributions (AVCs):

NEST require that members wishing to make additional payments to their own pension pot do so directly using a credit/debit card payment via the NEST website. You should therefore leave the AVC boxes unticked.

Earnings basis - select one of the following options:

The fields on the top right hand side of the screen (Address, Postcode, Telephone etc.) are not used for auto-enrolment purposes and so can be left blank. If you wish to, you could record your pension scheme details here for reference.

Default contribution rates:

You can if you wish set the 'default' percentage for employee and employer pension contributions for this particular pension scheme. Please be aware that setting a default percentage on this screen does not automatically set the contribution percentages for each employee. You still need to enter the actual percentages individually on the 'Employee Details' screen (see section 4 below). Setting the 'default' percentage on this screen simply makes the process slighty quicker.

  • Employee - Typically this is set to 1%, but the actual % depends on your particular pension scheme. Please contact NEST if you need further advice.
  • Employer - Typically this is set to 1%, but the actual % depends on your particular pension scheme. Please contact NEST if you need further advice.
  • Click 'OK' to save this information.

    3- Employee Assessment

    Payroll Manager has an assessment tool to help you determine which of your workers need to be automatically enrolled into your pension scheme. It is important that you understand the rules behind this assessment, as there are a number of other duties (such as communicating information to workers) that you will need to perform following the assessment process. Based on this assessment, some of your workers will need to be automatically enrolled into your pensions scheme (the 'eligible jobholders'), whilst others ('non-eligible jobholders' and 'entitled workers') have a right to join the scheme if they choose to do so. Your pension provider will be able provide more detailed help and guidance with regards to the meaning of each of these categories. More information can also be found at The Pensions Regulator website.

    An assessment is based on an employee's age and earnings, so you must ensure that you have this information entered into the software first. You should run the assessment on your staging date, and each time that you run your payroll to see if the status of any employee has changed. You can also run the assessment before your staging date if you wish to get a general idea of how many employees are likely to be enrolled into your pension scheme.

    Running the assessment

    4 - Adding Employees to the pension scheme

    After following the Assessment procedure you can then add the relevant employees to the pension scheme.

    From the main menu click 'Employees' then 'Employee Details' then click on the 'Auto-Enrolment pensions' tab.

    Employee Details

    The following details need to be set for each employee.

    A report is available which allows you to check that all employee pension details have been input correctly. Click 'Pensions' from the main menu and then 'Employee Pensions Report' to produce this report.

    5 - Pension contributions

    The amount that the employee and employer must contribute to the pension scheme is determined by the scheme’s rules and you should contact your pension provider to discuss this. You can enter pension contributions on both the 'Employee Details' screen and on the 'Pay Details' screen.

    IMPORTANT: You should only enter pension contributions for those employees that have actually joined the pension scheme! i.e. DO NOT enter contributions for employees that are not yet in the pension scheme or will not be joining a scheme.

    Notes about Tax Relief and the Earnings Contribution basis

    If you wish to check that an employee is having the correct pension deduction made from their pay, it is important that you understand how tax relief and the earnings contribution basis affects these deductions.

    Tax relief:

    NEST pension schemes operate using the Relief at Source (RAS) method of tax relief. After receiving the employee pension contribution NEST claims basic rate tax relief from HMRC and adds it to the pension pot of that employee.

    e.g. If a member wishes to make a £100 contribution they'll only need to pay £80 into their pension scheme. NEST reclaims £20 from HMRC making up the pension pot to £100. If you set the employee pension deduction to 1% in Payroll Manager, the software will calculate a 0.8% deduction and NEST will reclaim the remaining 0.2%. Contributions made to a RAS scheme do not affect the amount of income tax deducted from the employee through payroll, as the tax calculation is based on the whole amount of taxable pay before the pension deduction is taken.

    How the Earnings basis for contributions affects the deduction amounts:

    Different pension schemes allow for different earnings basis on which % contributions are to be calculated (the basis to be used is agreed beforehand between the employer and NEST).

    It is very important to have this set up correctly in Payroll Manager before any deductions are made. If you are unsure of the earnings basis that your particular scheme uses you should contact NEST for advice.

    6 - Communicating with employees

    Communicating information to employees regarding auto enrolment is an important part of the new employer responsibilites. Payroll Manager WILL NOT manage this whole procedure, and it is important that you understand which employee should be issued which which piece of information at which time. The Pensions Regulator website has a specific section 'Write to your staff' which gives detailed information regarding employee communications.

    Although NEST will not handle these communications for you, they do have letter templates which you can download from their website if you wish.

    The Pensions Regulator provides three letter templates for use when employees are being 'automatically enrolled', for those that are 'not being automatically enrolled' and those for whom you are using 'postponement'. Payroll Manager has each of these templates built-in, to allow you to produce the relevant letter for each employee if you wish.

    You can produce these as follows:

    Auto-Enrolled Not Enrolled Postponement

    * Note: You may find it useful to click on the 'AE Pension' button when selecting employees to receive these letters.

    Select employees

    7 - Uploading information to NEST

    NEST allows you to submit information to them in a number of different ways. You can choose the method which suits you best:

    CSV file upload

    Payroll Manager is able to produce the following csv files:

    You can produce these files in the following way:

    To produce the enrolment file for adding members to the pension scheme:

    IMPORTANT: You should not use Excel (or any other spreadsheet software) to open your csv files after creating them as this may reformat some fields which could result in NEST rejecting the file.

    To produce the contributions csv file:

    IMPORTANT: You should not use Excel (or any other spreadsheet software) to open your csv files after creating them as this may reformat some fields which could result in NEST rejecting the file.

    NEST Web Services

    NEST has developed a system called 'NEST Web Services' which allows payroll software to submit information directly, rather than enter / upload it on the NEST website. NEST offer a number of different services, and Payroll Manager currently supports the following:

    ( We are in the process of developing support for a further NEST Web service, 'Approve for payment', which sends NEST an employer's confirmation that the payment of a contribution schedule for an agreed amount will be made by the employer. Currently you are required to log onto the NEST website in order to action this).

    You can set up and use NEST Web Services in the following way:

    Using the NEST 'Enrol Workers' service for adding members to the pension scheme:

    Using the NEST 'Update contributions' service:

    NEST Web Services Error Messages:

    If you receive an error message whilst using NEST Web Services then please refer to NEST's own guide on Web Services Error Messages (a downloadable spreadsheet). You may find that you have missing or incorrect information (e.g. wrong Username or password) which is stopping the submission from being successful.