Discrepancies between pension calculations in BrightPay and other pension providers like Smart Pension may occur due to tax relief at source. 

This relief impacts calculations, with amounts being adjusted for a 20% tax relief by the pension provider. 

To resolve such discrepancies, review the tax relief settings in BrightPay by selecting the employee, clicking on the spanner icon next to their pension amount, and adjusting the tax relief basis if necessary.

Ensure that the correct tax relief method expected by the provider, such as 'tax relief at source,' is applied.

Note: For automatic enrolment pensions, the minimum total contribution is 8% of qualifying earnings, with a minimum employer contribution of 3%.
The standard contribution setup is 5% employee and 3% employer, but employers can choose to contribute more if desired.

If your pension scheme uses tax relief at source, the typical 5% employee contribution will show as a 4% deduction from the employee’s pay in BrightPay—because the remaining 1% is claimed via tax relief. However, the software should still display 5% as the employee contribution on the main area of the payslip.

If you see a minimum pension contribution flag in BrightPay, check that your pension settings are at least 5% employee and 3% employer to meet the legal minimum.

Pension contributions and tax relief at source — why the deducted amount looks different

If your pension scheme is set up as tax relief at source, the contribution amount shown on the main BrightPay screen is the gross figure — BrightPay automatically deducts 20% from this to calculate the net amount actually deducted from the employee's pay. This is correct behaviour and is not an error.

For example:

• A fixed amount of £100 entered in BrightPay will result in £80 being deducted from the employee (BrightPay removes the 20% basic rate tax relief, which the pension provider then reclaims directly from HMRC)
• A percentage of 5% entered in BrightPay will result in 4% being deducted from the employee

If you want the employee to have a specific net amount deducted, you will need to gross up the figure you enter in BrightPay. To do this, divide the desired net deduction by 0.8. For example, if you want £100 net deducted from the employee, enter £125 on the BrightPay screen (£125 x 0.8 = £100). The same grossing up principle applies to percentage-based contributions.

This applies to both fixed pound amount and percentage-based contributions where the scheme uses tax relief at source. If your scheme uses the net pay arrangement instead, contributions are deducted before tax is calculated and no grossing up is required.

If the pension contribution amount in BrightPay does not match what your pension provider is expecting, this is usually caused by a mismatch between the pensionable earnings basis set up in BrightPay and the scheme settings held by your provider.

A common example is where BrightPay has been set up using qualifying earnings — meaning contributions are calculated on earnings between £520 and £4,189 per month (£120 and £967 per week) — but the pension provider has the scheme set up on gross earnings, meaning they expect contributions to be calculated on all earnings. In this case the provider will expect a higher contribution than BrightPay is calculating.

To resolve this, you will need to amend the pensionable earnings basis in BrightPay to match the settings held by your pension provider. Go to the pension scheme settings in BrightPay and update the earnings basis accordingly. If you are unsure which basis your provider is using, contact them directly to confirm before making any changes.