Understanding your payslip
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Checking and understanding your payslip will help you know whether you have been paid correctly and that the right amounts of tax and insurance have been paid on your behalf. You should also be able to check that any other deductions from your pay are correct.
Your right to a payslip
All employees are entitled to an individual, detailed written payslip – at or before the time you 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
Your payslip must show:
- Gross pay – your full pay before any tax or National Insurance has been taken off.
- The amounts of any deductions which change from payday to payday – variable deductions, for example tax and National Insurance, and what the deductions are for.
- The total amount of any fixed deductions – these are deductions which 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 on at least once a year.
- The total amount of take-home pay after deductions.
- The amount and method for any part payment of wage (for example separate figures of a cash payment and the balance credited to a bank account).
Your employer might include additional information on your payslip which they are not required to provide, such as:
- National Insurance number
- tax code
- pay rate (either annual or hourly)
- breakdown of additional payments like overtime, tips or bonuses, which must in any case be included in your gross pay figure
Decoding 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.
3. The date
The date your pay should be credited to your bank account is usually shown.
4. The tax period
The number here represents the tax period for that payslip, for example if you are paid monthly, 01 = April and 12 = March.
5. Your tax code
Your tax code will be sent to you by HM Revenue & Customs (HMRC). It is the code that 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 notification of your tax code.
6. Your National Insurance (NI) number
This is usually shown on your payslip. You have to have an NI number to work in the UK. You have the same NI number throughout your whole life – even if you change your name. It is 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 may pay any expenses owing to you via the payroll. Some employers will itemise each expense payment separately on the payslip while others add the total amount together and show it as a taxable or non-taxable amount.
9. Deductions – tax and National Insurance
Your payslip must show the amount of variable deductions, like tax and National Insurance, and any contributions you’re making to a workplace pension.
If you are 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 may also be shown.
11. Student loan
If you are making repayments on a student loan, this will be shown on your payslip. If you are an employee, you’ll normally start making student loan repayments from the April following the date you graduate or leave your course. Your employer will be told by HMRC how to work out and deduct the right amount.
The Student Loans Company is told once a year by HMRC what has been repaid. So, it is sensible to keep your payslips and P60 as a record of the repayments made (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. The Child Support Agency (CSA) or Child Maintenance Service can also ask for a Deduction from Earnings Order (DEOs) for the maintenance of a child. Where 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 where it is deducted, 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 are 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 deductions will be made in respect of tax, National Insurance and student loans, etc. Under your contract you may 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 are 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 may also receive maternity pay, which will usually be shown separately.
If parents choose to share time off, and take Shared Parental Leave (ShPL), they may 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 adopt, the other partner can be eligible for ASPP.
Again, there are certain conditions that you must meet to be able to qualify for these payments. They are 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) may 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
Some payslips will have a section which shows how much you have been paid so far in this financial year (from 6 April to 5 April). It might also show totals for how much you paid in tax, National Insurance, student loans and pensions.
18. Net pay – what’s left
The most important figure on the payslip for most people is their take-home pay. This is the amount you actually receive once all the deductions have been made. You should check this against your bank statement to make sure what is paid in is the same amount.
19. Important messages
Some employers use a space on the pay slip for important messages. These may give you extra information about your pay or other information they want to share.
If you don’t understand anything on your payslip, or think there is possibly a mistake, speak to someone in the payroll section of your company. They should be able to help you and sort out any problems.
Check and keep your payslip
Don’t just glance at your payslip. Check it on a regular basis so no mistakes slip through. It is also sensible to keep your payslips in case you need them to apply for a mortgage or tax credits before you have received your annual P60 at the end of the tax year.
To see an example of a payslip you can check the version at learndirect.