Pension Salary Sacrifice

[ganeshptrk]

I know this topic was discussed in the forum in the past, but there was no definitive answer so posting it again.
I applied for pension salary sacrifice sponsered by my employer. My question is how should I calculate my gross income for earnings. Is it before deducting the pension or after.
For example if my gross salary is GBP1000 per month. The pension salary sacrifice is GBP100 per month. Then should the salary be 1000 or 900 pounds. The guidance says gross income before tax will be considered. As all you know in this case, tax is calculated on 900 pounds and not 1000 pounds.

I am asking this because the answer will affect on my earnings category and thus eligibility for Tier 1 extension.

Thanks

[tvn_ramesh]

I know this topic was discussed in the forum in the past, but there was no definitive answer so posting it again.
I applied for pension salary sacrifice sponsered by my employer. My question is how should I calculate my gross income for earnings. Is it before deducting the pension or after.
For example if my gross salary is GBP1000 per month. The pension salary sacrifice is GBP100 per month. Then should the salary be 1000 or 900 pounds. The guidance says gross income before tax will be considered. As all you know in this case, tax is calculated on 900 pounds and not 1000 pounds.

I am asking this because the answer will affect on my earnings category and thus eligibility for Tier 1 extension.

Thanks

i was in ur shoes few months back before i applied for my extension..

To put it straight you have to use 900 as ur GROSS.. why becos

Once your employer registers with some company to take care of the pensions.. from that month you will start getting payslips with Gross mentioned as 900 instead of 1000 as it used to be.. so when you calculate the earnings u have to add ur Gross(es) in ur pay slips to get ur earnings points..

i did so in my application and got it

[Sushil-ACCA]

Yr salary is GBP 1000
£100 deduction towards pension is called deduction to do with tax planing as well as pension benefit

[John]

ganeshptrk, you use the rate of pay as now shown on your payslips! If that is now £900 per month, that is what your salary is.

[mvent00]

Yes, that is right, you should use the rate shown on your payslips. Because to apply for Tier 1, you have to use these payslips as a proof of previous earnings. And you would not be claiming against your proof.

ganeshptrk, you use the rate of pay as now shown on your payslips! If that is now £900 per month, that is what your salary is.

[Sushil-ACCA]

In employment agreement salary is £5000 pm +benefits

now cmpany provides 8 % maximum of salary as company contribution toward pension in % of employee contribution

say empyee makes 5 than comapny 5 %
emplyee 8 % company 8%

emplyee 10 company 8% --8% maximum

salary slips comes like this

Basic 5,000
pensin 500 (10 %)

NI 350.00 (SAY)
Tax 650(say)

Net 3500.00


What is salary FOR HO point of - not 4500 - I am sure rest readers / advisors can make their own judgement.

[John]

Sushil-ACCA, in your example the salary is £5000 pm.

However, a slightly different scenario, some salary is sacrificed and now the salary on the payslip is shown as £4500. And in the background, not shown on the payslip, the employer's contribution to the pension scheme has increased by £500 pm, on top of what the employer would have contributed anyway.

In this scenario the pay for visa purposes is now £4500 pm.

Why would anyone enter into this scenario? NI saving for both the employer and the employee. But possible detrimental effect for visa renewal purposes.

[Sushil-ACCA]

It is Self explanatory

that salary is £5,000.00 and over above company is contributing 8% 0f basic that £400.00 in pension kitty

still i am claiming only £5000.00 in no case £ 4500.00 (in thorey it can be £5400.00)

you can pay or get pension contribution by two ways one directly payment from salary

or take full pay pay yr pension get total tax relief by expanding yr tax slab

hope it make clear

[John]

Sushil-ACCA, the answer is actually quite simply. Employer's contributions to a pension scheme do not count as earnings of the employee. Either for tax purposes, or for visa purposes.

[tvn_ramesh]

Sushil-ACCA, the answer is actually quite simply. Employer's contributions to a pension scheme do not count as earnings of the employee. Either for tax purposes, or for visa purposes.

I completely agree with John.. especially in case where the employee goes for the SALARY Sacrifice (SS)..

i am an example and my payslips shows my GROSS after the SS cut.. and i claimed the earnings based on my new GROSS..

[Sushil-ACCA]

Sushil-ACCA, the answer is actually quite simply. Employer's contributions to a pension scheme do not count as earnings of the employee. Either for tax purposes, or for visa purposes.

I completely agree with John.. especially in case where the employee goes for the SALARY Sacrifice (SS)..

i am an example and my payslips shows my GROSS after the SS cut.. and i claimed the earnings based on my new GROSS..

THIS topic is about own contribution and to claim it or not -one thing

£5000 is definately salary not £4500.00 ,

rest readers r better to make own judgement after going through above example . even employers contribution is shown on salary slip.


-

[tvn_ramesh]

rest readers r better to make own judgement after going through above example . even employers contribution is shown on salary slip.
-

no offence meant.. Sushil..

Incase of salary sacrifice i dont think the employers contribution is shown on the salary slip..
even your actually salary of 5K is not shown and only 4.5K is shown..???

[Sushil-ACCA]

IF u get a chance to see such salary slip than this will be clear to u

all info i mentioned above are shown in pay slip ,

[tvn_ramesh]

IF u get a chance to see such salary slip than this will be clear to u

all info i mentioned above are shown in pay slip ,

When i applied for my Tier1 in Jan.. i am in the same situation dude.. so dont need to wait to get a chance to see such payslip..

I am putting this out of my Own experience.. if in doubt i always stay on sidelines.. than mis-guiding..

send me(PM) ur email id i will send u my payslip.. it will help you clear ur doubt..

[Sushil-ACCA]

I have no doubt s that why i am replied the query , i have see atlest many salary slip of mnc company employess while auditing their pay roll.

still this is advice / guideline - relying is judgement of individual

[tvn_ramesh]

What i meant to say here is an applicant can claim ONLY the Gross amount shown in his payslip.

And in case if he opts for the salary sacrifice(SS) then in the Gross amount will be decreased even in the palyslip (atleast this is what i saw in my case).

And in such case even if your actually salary before the SS option is 5000/pm after SS will be 4500/pm and because this 4500/pm is shown on ur payslip as Gross sal.. we can use only 4500/pm for earnings calculation.

The Author(Ganesh) of this thread should use the amounts based on his situation.. but out of the Author's 12months if he started receiving salary based on SS for only some of his months.. say 5months (4500/pm) then the salary of the earlier 7months should be taken as per his payslips..(5000/pm)

That would be

5000 x 7months = 35000 (Before SS)
4500 x 5months = 22500 (After SS)
Total gross for earnings = 57500

[Sushil-ACCA]

reader will better interpret his situation now, after yr and my health discussion.

Regards

[tvn_ramesh]

reader will better interpret his situation now, after yr and my health discussion.

Regards

Agreed

[HSK Accountancy Services]

What i meant to say here is an applicant can claim ONLY the Gross amount shown in his payslip.

And in case if he opts for the salary sacrifice(SS) then in the Gross amount will be decreased even in the palyslip (atleast this is what i saw in my case).

And in such case even if your actually salary before the SS option is 5000/pm after SS will be 4500/pm and because this 4500/pm is shown on ur payslip as Gross sal.. we can use only 4500/pm for earnings calculation.

The Author(Ganesh) of this thread should use the amounts based on his situation.. but out of the Author's 12months if he started receiving salary based on SS for only some of his months.. say 5months (4500/pm) then the salary of the earlier 7months should be taken as per his payslips..(5000/pm)

That would be

5000 x 7months = 35000 (Before SS)
4500 x 5months = 22500 (After SS)
Total gross for earnings = 57500

I think this forum has a bias towards accountants that is why they dont agree with our experience. I am sure these are solictors!!

Sushill ACCA explained everything accurately. The Gross salary is the salary before any deduction i.e Tax, National Insurance, expenses, anything and Pensions contribution.

Taking the above example if somebody's payslip does not show £5000 and shows only £4500 then that does not mean the gross salary is decreased and we should take the lower figure.

Different payroll companys use different payroll systems . Some systems shows full £5000 and some £4500.

Thing to note is that payslip is issued only for employees reference. The primary user is the Employee and not the Home Office!!

The main document is the contract of employement between an employee and the employer. That clearly shows what is the Gross Income and what is the pension contribution etc. If somebody has similar problem and his payroll does not match with the actual Gross salary as per the contract then he can always shows the Contract of Employment plus a letter from his employer to confirm the Real Gross Income.

I hope that will settle the healthy dicussion.

Cheers

[tvn_ramesh]

Here the author Ganesh.. requested help for his Tier1 (G) earnings query.. and we need to suggest him as per the HO- Guidance and rules so that he puts his case properly and gets approval with no risk;

Lets not mis guide him or NOT get diverted from actual subject.. pls create a new thread for that topic;

BTW: Employer-employee CONTRACT is not one of the documents you can show as earnings proofs;

[hjlp]

Well, let me explain this SS things, and please do advice especially if you made it Tier1 by original pay package. Not "Gross" income on your pay slip.

The problem start from more and more company doing SS as a part of benefit for you.

For example, if you earn £2000 a month and in theory you should have £24000 in the past 12 months and associated points should be given.
However if you joined pension scheme, 5% of you 2000 will get into your pension potter and company wil match you 5% to higher percentage.
You ended up still earning £2000, but you pay slip will have a line before tax and NI, call benefit deduction!!(at least mine is showing like that)
So you pay slip will have £2000 and -£100 benefit exchange, so your gross income become £1900!

and your payslip gross pay is no longer £2000 , IT'S £1900. So this will affect all payslip and P60. But actually your employer pay you same amout of money but tax document showing less just because you not paying tax and NI for that very tiny part of money.

And very unfotunatelly that tiny part will affect people which is just above line of threshold.

I haven't applied Tier 1 yet, but I have exactly thesame problem. I think what I can say in according with Tier1 guidance,
"money paid to applicant as a pension " and "state benefits" are not part of your earning,
They didn't say "money not incurred NI and Tax" are not your earning, So I think £2000 is your lawful earning! just £100 I used as a pension before NI and tax. so your income should be £2000.

Howevery I haven't applied Tier1 yet. It is difficult to explain, especically if you submit your P60 and payslip, as there will have a descrepancy between your company letter and your gross earning on P60. That part is you put into your pension potter.

If I any solicitor here, any suggestion would be helpful

[tvn_ramesh]

Agree with Hjlp:

But when an employer comes up with this SS option to you.. it is totally upto you to join that or not..

And we who are always effected by the changes in the HO rules should always keep it in mind HOW WILL THIS EFFECT MY FUTURE EXTENSIONS...

And this is what exactly i thought and discussed with my employer before joining the SS thingy...

As mentioned in your example if an applicant is getting very low salary which is on the border/edge of ever changing HO Min earnings qualification..

you have sacrifice one of those Pension or Extension;

Anyway thanks for your views mate..

[hjlp]

BTW,

before they introduced the scarefice things, I am still getting £2000 a month and in the same pension scheme in my example, but do no deduction before tax and NI, it shows gross £2000! Pension will take out after NI and tax ,So they will deduct £107.05(for example) rather than £100 in my previous case. as you £100 go to your penstion potter. and rest of contribute to NI and tax.

So I am only better off tiny amout by join this scheme, around £15 in my genuine case.But from payslip. it looks your make a quite big drop from previous earning.

Hope I explained everything ok! feel free if you don't understand my POOOOR English!

[tvn_ramesh]

BTW,

before they introduced the scarefice things, I am still getting £2000 a month and in the same pension scheme in my example, but do no deduction before tax and NI, it shows gross £2000! Pension will take out after NI and tax ,So they will deduct £107.05(for example) rather than £100 in my previous case. as you £100 go to your penstion potter. and rest of contribute to NI and tax.

So I am only better off tiny amout by join this scheme, around £15 in my genuine case.But from payslip. it looks your make a quite big drop from previous earning.

Hope I explained everything ok! feel free if you don't understand my POOOOR English!

Got your point mate..

I will let other seniors to put in their views which will be more helpful to you rather than only 1view from me.. for how this can be solved.. (ur case)

Your english is lot better than me.. dont you worry

Letz wait for others to respond...

[hjlp]

No, just posted my case, as it's not about you join their scheme, it's down to their scheme tax and NI free or not, as in my second paragraph,

I approved following. I joined pension, and it's different gross income on their tax documents! I do have two slip can show HO

But I been get paid same, it's down to nature of your pension scheme. if my company never joined that scheme, I still pay pension, I am OK!

So it sounds as long as you pay tax and NI for every penny your earning!
you are ok

but if you not pay tax and NI for tiny part of your earning, you might be end up not been recongnised by HO.

I think this is arguments starts. LOL, My payslip got all incoming from my employer, so it's down to HO , how they calculate your income, if they simply add up gross income, it will be...........
Good luck