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Payslips Explained

All employees are entitled to an individual, detailed written payslip at or before the time they are paid.

Your written payslip doesn’t have to be on paper it can be sent to you by email or accessed through a website.

This ‘right to a payslip’ applies to casual staff as well as employees but doesn’t apply to independent contractors or people working freelance.

Information that will be on your payslip

Remember to check your payslip regularly and check it shows the same tax code as your latest tax invoice.

Your payslip must show:

  • Gross pay - your full pay before any tax or National Insurance has been taken off.
  • Net pay - the total amount of take-home pay after deductions. The amounts of any deductions that change from payday to payday, known as variable deductions. For example tax and National Insurance, and what the deductions are for.
  • The total amount of any fixed deductions. These are deductions that don’t change from payday to payday, for example, union dues. An employer does not have to give details of what these deductions are for, as long as 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.

Additional information can be included on your payslip which your employer is not required to provide, such as your:

  • Tax code
  • National insurance number
  • Pay rate (annual or hourly)
  • Additional payments, such as overtime, tips or bonuses (these must be included in your gross pay figure).

Getting to know your payslip

 

Your personal information

Your name and sometimes your home address will be shown.

Your payroll number

Some companies use payroll numbers to identify individuals on the payroll.

Date

The date your pay will be credited to your bank account is usually shown.

Tax period

The number here represents the tax period for that payslip, for example, if you’re paid monthly, 01 = April and 12 = March.

Tax code

HM Revenue & Customs (HMRC) will send your tax code to you.

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 you should check this against your latest tax code letter. It is your responsibility to check!

Your National Insurance (NI) number

In order to work in the UK you must have a NI number. You have the same NI number throughout your whole 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.

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 hours worked.

It could also show any extra payments you have earned on top of your basic pay like bonuses, commission and or overtime.

Expenses

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.

Deductions – tax and National Insurance

Your payslip must show the amount of variable deductions, such as tax and National Insurance.

Pensions

Nowadays everyone should be 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.

Student loan

If you have met the threshold to start repaying 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.

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 additional £1 as an administration fee.

This fee can only be charged if a deduction or partial deduction has actually been made.

Employers often waive the fee but if they deduct it, it must be shown separately on the payslip with a description.

Sick pay

Depending on how long you have been ill and your company’s sick pay policy will dictate what is shown on your payslip.

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, etc. Under your contract, you might also be entitled to occupational sick pay.

Maternity, paternity and adoption pay

For women who have just had a baby and are receiving 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 (ShPL), they might be paid Shared Parental Pay (ShPP).

You will have to meet a certain criteria to be able to qualify for these payments. They’re all treated in the same way as ordinary earnings for tax and National Insurance.

Workplace benefits

If you get health insurance through your workplace or have a company car, these will be listed on your payslip and can affect your tax code.

Repayment of season-ticket loans, cycle-to-work scheme loans and also charitable donations (using the give-as-you-earn scheme) might also be shown. If you currently signed up for one of these, then it should show up on your payslip.

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.

Net pay

For most net pay is the important figure on their payslip. Net pay is the amount you get once all the deductions have been made. You should check this against your bank statement to make sure it matches what is paid in. This is the money you have to live on so it’s a figure you need to be most aware of.

Keeping payslips

It’s important to keep your payslips in a safe place. Reasons why include:

  • 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.
  • Record keeping - 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.
  • Evidence of earnings - For some financial products, such as loans or mortgages, you might be asked to prove your earnings by showing your last three payslips.

You can create sample payslips using our payslip calculator