Understanding your payslip
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Whether it’s your first payslip or if you’ve been working for years, it’s still important to know how your pay is worked out. Your payslip contains important information, including your payroll number, your gross and net pay, and normally your tax code too. It’s important to understand your payslip and how to make sure you’re being paid the right amount.
Your right to a payslip
All employees and workers are entitled to an individual, detailed written payslip – when, or before, they’re paid.
Your written payslip doesn’t have to be on paper – it can be sent to you by email or accessed through a website.
The right to a payslip applies to casual staff as well as employees. It doesn’t apply to independent contractors or people working freelance.
What information your payslip must contain
Your payslip must show:
- Gross pay. Your full pay before any tax or National Insurance has been taken off.
- The total amount of take-home pay after deductions. This is called your net pay.
- The amounts of any deductions that change from payday to payday, and what the deductions are for. These are known as variable deductions. They include tax and National Insurance.
- The total amount of any fixed deductions. These are deductions that don’t change from payday to payday, for example, union dues. An employer doesn’t have to give details of what these deductions are for, if they give a separate statement with these details at least once a year.
- The amount and method of any part payment. For example, separate figures of a cash payment and the balance credited to a bank account.
- Since April 2019, your payslip should include the number of hours worked if your pay varies by the amount of time worked.
Your employer might include extra information on your payslip which they don't have to provide. For example, your:
- tax code
- National Insurance number
- pay rate (annual or hourly)
- extra payments, such as overtime, tips or bonuses. These must be included in your gross pay figure.
Understanding your payslip
1. Your personal information
Your name and sometimes your home address will be shown.
2. Your payroll number
Some companies use payroll numbers to identify individuals on the payroll.
The date your pay should be credited to your bank account is usually shown.
4. Tax period
The number here represents the tax period for that payslip. For example, if you’re paid monthly, 01 = April and 12 = March.
5. Your tax code
Your tax code will be sent to you by HM Revenue & Customs (HMRC).
The code tells your employer how much tax-free pay you should get before deducting tax from the rest. If the code is wrong, you could end up paying too much or too little tax, so it’s important to check this against your latest tax code notice.
6. Your National Insurance (NI) number
You must have a National Insurance number to work in the UK.
You have the same NI number throughout your life – even if you change your name.
It’s your personal number for the whole of the social security system. It’s used to make sure all your contributions are recorded properly and helps to build up your entitlement to state benefits – such as a pension.
7. Payments, wages, bonuses, commission
This will show how much you have earned in wages before any deductions are made.
It might also show how your pay was calculated, for example, your hourly rate and the number of hours worked.
It could also show any extra payments you have earned on top of your basic pay like bonuses, commission or overtime.
Your employer might pay any expenses owed to you via the payroll.
Some employers will list each expense payment separately on the payslip. Others combine them to show a taxable or non-taxable amount.
9. Deductions – tax and National Insurance
Your payslip must show the amount of variable deductions, such as tax and National Insurance. Find out How tax and National Insurance are deducted from your pay.
If you’re paying towards a workplace pension that your company has set up or arranged access to, the amount you’re contributing will be shown.
If your employer is contributing too, that amount might also be shown.
Find out more in this guide Why save into a pension?
11. Student loan
If you’re making repayments on a student loan, this will be shown on your payslip.
If you’re an employee, you’ll normally start making student loan repayments from the April following the date you graduate or leave your course. HMRC will tell your employer how to work out and deduct the right amount.
Once a year, HMRC tells the Student Loans Company what has been repaid. This means it’s a good idea to keep your payslips and P60 as a record of the repayments in case of any problems.
Some employers put running totals of tax and deductions on your payslip. These are particularly useful for keeping track of your total student loan repayments.
12. Court orders and child maintenance
A court can order deductions directly from your pay, for example for unpaid fines or for debt repayments to be handed to your creditors.
Child Maintenance Service (CMS) can also ask for a Deduction from Earnings Order (DEOs) for the maintenance of a child.
If these orders are made for deductions, the employer can, if they choose to, take an extra £1 as an administration fee.
This fee can only be charged if a deduction or partial deduction has been made.
Employers often waive the fee but if they deduct it, it must be shown separately on the payslip with a description.
13. Sick pay
What is shown on your payslip will depend on how long you have been ill and your company’s sick pay policy.
Your employer is liable to pay you Statutory Sick Pay (SSP) if you’re off work sick for four days or more in a row, and you meet certain conditions.
SSP is treated like the wages or salary it replaces, so your employer will make deductions for tax, National Insurance and student loans.
Under your contract, you might also be entitled to occupational sick pay.
This will usually be shown as a separate figure – any Statutory Sick Pay is likely to be deducted from occupational sick pay.
14. Maternity, paternity and adoption pay
If you’re a mother who isn’t at work because you’ve just had a baby and you’re getting Statutory Maternity Pay (SMP), this will be shown on your payslip.
You might also receive maternity pay, which will usually be shown separately.
If parents choose to share time off, and take Shared Parental Leave, they might be paid Shared Parental Pay.
If a child is adopted, Statutory Adoption Pay will be paid to the new parent staying at home for a period after the adoption. If a couple jointly adopts, the other partner can be eligible for Additional Statutory Paternity Pay.
Again, you must meet certain conditions to be able to qualify for these payments. They’re all treated in the same way as ordinary earnings for tax and National Insurance.
15. Workplace benefits
Do you get health insurance through your workplace or have a company car? Then these will be listed on your payslip and can affect your tax code.
It might also show repayment of season-ticket loans, cycle-to-work scheme loans and charitable donations (using the give-as-you-earn scheme).
If you have signed up for one of these, it should show up on your payslip.
Find out more in this guide Cars, insurance and other employee benefits.
16. Other deductions
Any other deductions, like trade union subscriptions should be shown.
17. Summary of the year to date
Your payslip might show how much you have been paid so far in this financial year. A financial year runs from 6 April to 5 April.
It might also show totals for how much you have paid in tax, National Insurance, student loans and pensions.
18. Net pay – what’s left
For many people, the most important figure on their payslip is net pay.
So, what is net pay? It’s the amount you get when all the deductions have been made. It’s a good idea to check this against your bank statement to make sure it matches what’s paid in.
19. What’s the difference between gross and net pay?
Gross pay is the income you get before any taxes and deductions have been taken out. Your annual gross pay is what’s often referred to as your annual salary.
Net pay is what’s left after deductions like Income tax and National Insurance have been taken off. It’s what’s often referred to as your take home pay.
You can see what your gross pay was and how much has been taken off (if anything) on your payslip.
20. Important messages
Some employers use a space on the payslip for important messages. These might give you extra information about your pay or other information they want to share.
Keeping your payslip
It’s important to keep your payslips in a safe place – here are our top three reasons why:
1. Security - payslips contain a lot of personal information about you and your earnings, including your National Insurance number. Keep them safe to help avoid them being used for identity fraud.
2. Recordkeeping - it’s a good idea to keep a record of all your earnings and tax payments in case there’s a problem and you need to check old details.
3. Evidence of earnings - for some financial products, such as loans, you might be asked to prove your earnings by showing your last three payslips.
If you don’t understand anything on your payslip or think there might be a mistake, speak to someone in the payroll section of your company.
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