How to Understand your Payslip

Whether it’s your first payslip or you have been working for many years, it’s important to fully understand how your pay is worked out. Your payslip contains all the relevant important information, your tax code, deductions, gross/net pay and a few other things. It’s important to understand your payslip simply to ensure you’re being paid the right amount.

First and foremost all as an employees you are entitled to an individual, detailed payslip for the work that you undertake – this can be presented when or before you are paid.
Your payslip isn’t required to be on paper, it can be in digital form i.e. email or via a secure web portal.
The right to payslips applies to all casual staff as well as full-time/permanent employees, it doesn’t apply to contractors or anyone working freelance.

What Information must your payslip contain?

Your payslip must show this information:

  • Gross Pay – Your full pay before any national insurance, tax and/or pension contributions have been deducted.
  • Net Pay – your total amount of take-home pay.
  • Variable Deductions – the amount of any deductions that change from payday to payday and what these deductions are. These include tax and national insurance
  • Fixed Deductions – these are the deductions that do not change payday to payday. These would include any union fees for example.
  • Method of Payment – for example, separate figures for a cash payment and amount credited to a bank account.
  • Hours – since April 2019 your payslip must include the hours worked if you pay varies depending on the amount of time worked.

Your employer may choose to include other information in your payslip, for example:

  • Tax code
  • National insurance number
  • Pay Rate
  • Extra payments – overtime, tips or bonuses

What else is on there?

This is a list of the basic information that is on your payslip and what their function is:

  • Your personal information
    Your name and sometimes home address will be shown
  • Your payroll number
    Some companies will use payroll numbers to identify individuals on their payroll
  • The Date
    The date your pay should be credited to your account
  • Tax Period
    The numbers here represent the tax period for that payslip. For example if you are paid monthly, 01 – April and 12 – March.
  • Tax Code
    Your tax code will be sent to you by HMRC.
    The code tell 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 be aware of your latest tax code.
  • Your National Insurance Number
    You must have a national insurance number to legally work in the UK.
    You have the same number throughout your working life, it’s your personal number for the entire social security system. It is used to make sure all your contributions are recorded correctly and helps to build up your entitlement to state benefits, such as the state pension.
  • Payment, Wages, Bonus and Commission
    This will show how much you have earned in wages before any deductions are made. It might for example also show how your pay was calculated with your hourly rate and the number of hours worked. It could also show any extra payments you’ve earned on top of your basic pay, like bonuses, commission or overtime.
  • Expenses
    Your employer might pay any expenses owed to you via payroll. Some employers may combine all expenses into one single payment, other may list all individual payments.
  • Pensions
    If you are paying towards your workplace pension, the amounts both you and your employer are contributing will be shown.
  • Student Loan
    If you are making repayments to your student loan the amount will be shown.
  • 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.
    The Child Maintenance Service (CMS) can also ask for a Deduction from Earnings Order for the maintenance of a child.
  • Sick Pay
    What is shown on your payslip will depend on how long you’ve been ill and your specific employer’s sick pay policy.
    Your employer is liable to pay you statutory sick pay if you are off sick for four days or more in a row and meet certain conditions.
    Statutory sick pay is treated as earnings and is therefore subject to tax and national insurance.
  • Maternity, Paternity and Adoption pay
    All statutory maternity pay and statutory adoption pay will be shown on your payslip, again these are considered earnings so will be subject to tax and national insurance.
  • Workplace benefits
    If you are part of a workplace health insurance scheme or have benefits such as a company car these will be listed on your payslip and can affect your tax code.
  • Summary of the year to date
    Your payslip might show how much you have been paid to date in that financial year. It may also include how the total deductions made in that timeframe also.
  • Net Pay
    Net pay is the amount you get to take home after all the deductions have been made.

If you see something on your payslip that you think is out of the ordinary. Your friendly local accountant can often help you will some sage advice. We’re here to help, you can contact us here.


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