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Salary sacrifice and PAPDIS: what you need to know

Salary sacrifice (also known as salary exchange) lets your team swap part of their gross pay for pension contributions. It’s a tax-efficient setup that can save on National Insurance for both your business and your team.

Here’s how to use the PAPDIS standard with Thrive, in partnership with Smart Pension, to make sure everything runs smoothly.

1. Confirm what’s agreed

Before you upload anything:

  • Make sure your team member has signed a salary sacrifice agreement.

  • Check the date it kicks in.

  • Update your payroll settings so the sacrificed amount is treated as an employer contribution.

2. Update your payroll software

You’ll need to:

  • Show reduced gross pay for anyone using salary sacrifice.

  • Stop deducting pension contributions from their net pay.

  • Increase employer contributions to cover both your usual amount and what your team member’s sacrificed.

Your payroll provider should have step-by-step guidance.

3. Export your PAPDIS file

When you run payroll:

  • Export your file in PAPDIS format (usually CSV).

  • Make sure it’s set up to work with Smart Pension.

4. Format the data correctly

To show salary sacrifice in your PAPDIS file:

  • Set Employee Contribution Amount to 0.00.

  • Add the full contribution (yours plus theirs) under Employer Contribution Amount.  

  • Use S in the Contribution Basis column to show it’s salary sacrifice.

Example:

PayrollCode EEContribns ERContribns ContsBasis
12345 0.00 150.00 S
 

5. Double-check the numbers

Before you export your data:

  • Get your accountant or payroll adviser to check your salary sacrifice calculations.

  • Make sure what’s going into your payroll software is accurate.

It’s a small step that helps avoid bigger headaches later, like incorrect contributions or errors in your PAPDIS file.

6. Upload through the portal

  • Log into your Thrive portal.

  • Head to the payroll & contributions section.

  • Upload your PAPDIS file.

  • Use the Employee Change Request file to catch any updates before each pay run.

7. Check for errors

Thrive will flag any issues before submission. The most common ones?

  • Missing NI numbers.

  • Invalid contribution basis.

  • Employee contributions not set to 0 for salary sacrifice.

8. Review and submit

  • Check the summary.

  • If everything looks good, hit submit. Thrive will handle the rest and pass the data to Smart Pension.

9. Keep the records

For compliance and peace of mind, keep:

  • A signed salary sacrifice agreement for each person.

  • Copies of your PAPDIS files.

  • Upload confirmations from the Thrive portal.

Not sure about something?

We’ve got your back. Chat with our support team, call us, or drop us an email.

Need more detail? Check out our full PAPDIS Specifications and Assessment Codes Guide.