Human Resources Division
Jon Everard
Head of Payroll & Pension Services
j.everard@ucl.ac.uk
0207 679 1284
Human Resources Division
Salary Exchange – Pensions
Salary Overpayments
Human Resources Division
Salary exchange - Pensions
• What is it?
• Why are we doing it?
• When are we doing it?
• Who will it apply to?
Human Resources Division
Salary exchange - Pensions
What is it?
•
•
•
•
•
It is a salary sacrifice scheme akin to child care vouchers
Employer will pay the pension contribution on behalf of the employee
with the employees gross pay reduced by the amount of the pension
contribution
Employees overall pay will therefore be subject to less tax and national
insurance contributions
Pension contributions were already subject to tax relief (tax is
assessed after the contributions paid) so further savings for employee
now being made on NI contributions
Savings of upto £200pa in net pay for someone on £30,000
Human Resources Division
Total salary:
£15,000
£25,000
£50,000
Before
After
Before
After
Before
After
1250.00
1170.62
2083.33
1951.04
4166.67
3902.09
NICs:
75.68
68.22
154.01
141.58
243.79
241.14
Pension contribution:
79.38
0.00
132.29
0.00
264.58
0.00
Tax:
139.17
139.17
310.99
310.99
845.09
845.09
Net salary:
955.77
963.23
1484.04
1498.47
2813.21
2815.86
Monthly basic salary:
Increase in take home pay per
month
Increase in take home pay per
year
0.00
7.46
0.00
14.43
0.00
2.65
0.00
89.52
0.00
173.16
0.00
31.80
Human Resources Division
Salary exchange – Pensions
Why are we doing it?
•
Cost of pension provision is increasing with USS employer rate
expected to increase by 2% next year. This increase alone will cost
UCL in excess of £2M per annum
•
Salary exchange will bring savings to employees take home pay
without affecting their pension benefits
•
UCL will save money on employer national insurance costs
Human Resources Division
Salary exchange – Pensions
When are we doing it?
• Discussions and agreement on implementation reached with
Unions with their involvement on Implementation Group
• Implement with effect from April 2009 salary
• Communications begin December 2008
• Individual notification to all employees in February 2009
Human Resources Division
Salary exchange – Pensions
Who will it affect?
•
Assumption that all employees are opted into the scheme and
therefore have their pay reduced by the amount of pension contribution
paid by the employer, where they are a member of the USS or SAUL
pension schemes. Will not apply to NHS scheme members
•
Not beneficial for some employees i.e. being paid less than LEL,
contracted for less than 2 years
•
Employees to whom not beneficial will continue to pay pension
contributions and notified accordingly.
Human Resources Division
Salary overpayments
• What are the reasons for them happening?
• What can we do to stop them happening?
• What changes are UCL having to make going
forward on overpayments to employees who have
left
Human Resources Division
Salary overpayments
What are the reasons for them happening?
•
Late notifications of employee having left employment
•
Late or no notification of change of circumstance (reduction in hours)
•
Incorrect notifications
•
Employees not returning to work from maternity leave
•
No notification of sickness
Human Resources Division
Salary overpayments
What can we do to stop them happening?
•
Payroll can recall the pay of an employee upto noon of the day before payday.
Ring your payroll contact and advise them that you’ve got a late notification of a
employee leaving and they will ensure the correct pay is applied to the
employee
•
Get all notifications of employees change of circumstances in by the deadline. If
you can’t and you suspect that it will cause an overpayment, ring your payroll
contact and advise them.
•
Ensure that every day of an employees absence due to sickness is entered on
MyView. This will ensure we correctly reduce pay to half or nil pay if sickness is
long term and ensure employees are correctly paid Statutory Sick Pay
•
Understand that employees not returning from maternity leave is an unknown
but the earlier we are advised the easier it is to get back any monies that have
been overpaid
Human Resources Division
Salary overpayments
•
•
•
•
In last 12 months there has been 100 overpayments to leavers (reason = 20%
HR, 14% employee, 66% departmental) amounting to over £100K
Including active employees there have been 179 overpayments amounting to
£260K
Current processes at UCL involve the reversal through payroll of any
overpayment to an employee who has left with the department being credited
with the overpayment and the net debt being recouped via a central ‘bucket’
account. This does not conform to HMRC requirements and needs to be
changed.
From today any new debt of a leaver will only be credited back to a department
once it is repaid by the individual. On complete repayment by the individual we
will then claim back the tax and NI from HMRC and further reimburse the
department this amount