NHS Pension Scheme and Payroll

Processing a payroll for a specialist sector as Healthcare comes with certain rules, legislation and particular processes to follow. An area that needs particular specialist care is the NHS Pension Scheme and how it is applied to the payroll.

When applying the NHS Pension to an employees’ record, in order to deduct the appropriate pension amounts, it is necessary to take into account a few considerations.

Establish the ‘whole time’ annual figure for the member of staff for their particular role.

This is quite likely to vary from one Practice to another with no standard contract set in stone. It could range from 35, 37, 37.5 or 40 hours, to name some common ones. Then for each member of staff, the annual figure is achieved by taking their ‘whole time’ hours for the role and multiplying this by the hourly rate particular to that role. The ‘whole time/full time’ hours for the Practice are used to establish the tier even if the member of staff works part-time. Below are 2 worked examples explaining this further:

Example 1: Full-Time Employee working 37 hours per week

Practice ‘whole time’ hours are 37 x 52 (or 52.143 should the Practice use this ruling) = 1924 hours x hourly rate of £9.00 = £17316 total annual pensionable pay (see table below). This would fall into 5.6% tier.

Example 2: Part-Time Employee working 20 hours per week

You would still take the ‘whole time’ hours for the Practice which in this case is 37 and follow the same calculation as above. The same 5.6% tier would be applied.

In relation to the NHS Pension Scheme, the correct percentage is applied to the employees’ pensionable pay up to and including the ‘whole time/full time’ hours worked. The maximum number of hours that can be pensionable is the normal (standard) whole time hours for their particular role. For example, if the standard working week is 37 hours, a part-timer normally working 20 hours a week may pay pension contributions on an additional 17 hours per week (up to whole/full time). Any additional hours over and above the ‘whole/full’ time hours would be non-pensionable.

Contribution rates before tax relief (gross)

Tier Full-time pensionable pay used to determine        contribution rate Contribution rate (before tax relief) (gross)
1    Up to £15,431.99    5%
2    £15432.00 to £21477.99    5.6%
3    £21478.00 to £26823.99    7.1%
4    £26824.00 to £47845.99    9.3%
5    £47846.00 to £70630.99   12.5%
6    £70631.00 to £111376.99    13.5%
7    £111377.00 and over    14.5%

The employer pension contribution for the current tax year 2017/18 would be 14.38% on pensionable pay.

A version of this blog originally appeared on the website of one of our MHA association member firms, MHA Moore and Smalley.

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