Understanding your payslip

 03 Sep 2018

Payslips are more than just a piece of paper that the payroll department sends every time you get paid. It is something that you should learn to interpret adequately, regardless if it's the first time you´re employed or if you´ve been working for a long time. Payslips contain valuable information - gross and net pay are not the only relevant pieces of information there - your payroll number and tax code are also there, and they are also important. 

Here is a complete guide to fully understanding a payslip and how to make sure that everything is correct.

  • Who is entitled to receive a Payslip

  • What information should a payslip contain

  • Getting to know your payslip

  • Should I keep a record of my payslips?

Who is entitled to receive a Payslip

Everyone on a payroll is entitled to receive a payslip, therefore, all employees must receive a version before or on payday. It doesn't have to be an actual piece of paper, most payroll departments now send digital payslips (ePayslips). Bottom-line, everyone under a work contract is to receive a payslip, except for the self-employed or people working on a freelance basis.

What information should a payslip contain?

A regular payslip should have:

Gross Pay
This is the full amount you receive before taxes (including National Insurance) are taken.
Total deduction amount that may change between paydays

Known as variable deductions and taxes that may vary monthly, such as  National Insurance.

Total amount on fixed deductions
Union fees and similar are listed here. These type of deductions won't change from payday to payday, and also employers are not required to provide details of those deductions on monthly payslips, but they must - on an annual basis - provide a separate statement with those deductions in detail.
Total amount after deductions
This is the actual money you receive on your payslip after taxes have been taken off by the payroll department.
Payment method
Here you should find information on how the company will be paying your wage.

Besides, all employers should include the following information on payslips (and ePayslips): Tax Code, Pay Rate, any additional payments received from the company's payroll department.

Getting to know your payslip:

Look for these things on all of your payslips and make sure they are correct: 

Personal Information
Usually includes your full name and home address
Payroll NumberA payroll number is assigned to you by payroll and it's their way to identify you as an active employee.
This is the date in which you´ll be receiving the money in your bank account.
Tax Period
This represents the tax period for that specific payslip. Remember that the tax year is April to March.
Tax Code
HMRC (Her Majesty´s Revenue & Customs) will provide the payroll department with you personal tax code category. This code tells your employer the tax threshold and amounts of tax you should be paying dependent on your earnings. This is very important, and employees should always check it against previous payslips or tax code letter, to avoid issues with HMRC which can be costly.
National Insurance Number
This number is a must for everyone that works in the UK. Everyone's got one, and it never changes, you can change your name, and your NI number will be the same. This one is also important as it is the number that summarises the whole of your social security system. Keeps control of your contributions and by paying it, you receive government benefits such as state pension should be on all payslips.
Commissions and bonuses
This shows the whole of your wages before deductions of any kind, it can include information on how your was payslip calculated by the payroll dept. based on working hours. Additional incentives like commissions or bonuses and overtime are listed here as well.
Some companies use payslips to include any expenses that they may owe to an employee. They can be included on a separate list different than the payslip, or it can be all included in just one document where it only specifies if its taxable or not.
All Deductions
All payslips must show all variable deductions, and its specific amount, taxes and National Insurance fall into this category.
Some companies offer private pension plans that the employee can pay to the workplace, so the employer should include the amount that you're contributing towards that workplace pension. All contributions (including the employer ones, are also to be listed in the payslip)
Student DebtIf you're currently making repayments on a student loan, this will also be displayed on the payslip. Repayments usually commence the following April after the employee graduates, this is also based on salary and whether you're above the repayment threshold. However, on an annual basis, Student Finance will inform you how much you've repaid, so keeping your P60s safe is recommended.
Sick Pay
This depends mostly on how many days the employee has been indisposed and of course the company's policy on those scenarios. SSP (Statutory Sick Pay) applies to the employer if the employee meets a specific condition. SSPs are like regular wages so that the employer can make tax, National Insurance or Student Loans deductions on those as well.
Maternity Pay
Statutory Maternity Pay (SMP) happens when female employees require maternity leave and therefore are not working, these are listed on the payslips as well.
Work Benefits
Company car or individual health insurance plans can also be listed there and may have an impact on your tax code.
Year summary
Some companies show the whole amount of how much you´ve been paid during the financial year that runs from the April 6th to April 5th next year. It can also include a summary of the amount paid to National Insurance and pensions.
Net Pay
This is an important one because, after all, deductions, this is the amount you get to take home.

Should I keep a record of my payslips?

It is highly advisable for you to keep your payslips stored in a safe place, you may want to think about security - as you can see payslips may provide a vast deal of information that you certainly don't want to be spread out - to avoid any identity theft attempts. Keeping records of your payslips is also a good habit and a wise way to protect yourself from any problems as you´ll have all the information backed up in case any discrepancy with the payroll department. Finally, banks tend to ask for those slips as part of granting a loan process, they usually ask for the last three. It is a good practice that is not that hard to accomplish and comes with many benefits.

Times have changed, and payroll is not what it used to be. Many companies outsource this process; some use ePayslips and some others just stay with the good old payslip. It is essential for you to learn how to understand the information on the payslips that your employer gives to you. It will provide a better understanding of the whereabouts of your money deductions, and helps to avoid any issues with Customs and Revenue. Take a look at yours and see if you can figure out all the information it contains.