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. In this guide we’ll help you understand your payslip and explain how to make sure you’re being paid the right amount.
Your right to a payslip
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All employees and workers 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.
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
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.
- 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, 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.
- Since April 2019, hours on payslips where the pay varies by the amount of time worked.
Your employer might include additional information on your payslip which they are 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).
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 you should check this against your latest tax code letter.
6. Your National Insurance (NI) number
You must have a NI number to work in the UK.
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 – like 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.
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.
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 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.
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, etc.
Under your contract, you might also be entitled to occupational sick pay.
This will usually be shown as a separate figure – any SSP 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 (ShPL), they might be paid Shared Parental Pay (ShPP).
If a child is adopted, Statutory Adoption Pay (SAP) 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 (ASPP).
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
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 have signed up for one of these, then it should show up on your payslip.
16. Other deductions
Any other deductions, like trade union subscriptions, for example, 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 once all the deductions have been made. You should check this against your bank statement to make sure it matches what is paid in.
19. 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. 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.
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.
Different pay rates
If your pay varies depending on how long or when you work, your employer will have to include details of the hours you worked as well as how much you’ve earned on your payslip.
If you earn different amounts for different types of work, separate figures for both will have to be included on your payslip.
This change to legislation is aimed at employees who work variable hours and whose pay changes accordingly. This will make it clearer if you’re being paid the minimum of the National Minimum Wage.
Zero hours contract workers will particularly benefit from this new legislation.
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.