If you’re an employee, you should get a payslip whenever you are paid. But what is a payslip, and how do you make sense of it? Your payslip might seem complicated at first glance, but it’s easy to read once you know how. So, here are some tips for understanding your payslip and what it all means.
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What is a payslip?
A payslip is a summary of how much you earn in a given period, such as a week, fortnight or month. In short, it shows you how much you’re actually earning after tax.
There’s no set format for what a payslip should look like. All that matters is that you get one. It’s up to your employer whether they give out paper or digital payslips.
What should a payslip include?
Every payslip must contain certain information.
Gross pay
This is how much money you earn before tax and National Insurance contributions (NICs) are deducted. So, it’s your “gross” salary.
Net pay
Net pay is how much you earn after the tax and NICs come off. This is the amount you actually receive. Understanding your payslip begins by appreciating the difference between gross pay and net.
Deductions
Deductions include things like income tax and union fees. Your employer doesn’t need to specify every individual deduction on your payslip, but they should give you a summary of what these deductions are at least once a year.
Hours worked
If your pay varies depending on how many hours you work, then your payslip must show how many hours you worked in the period covered by the payslip.
Part payments
If you’re receiving some of your wage through a bank account and the rest in cash, this will show up on your payslip.
What other information might be on a payslip?
While payslips vary between employers, you’ll often find other information on your payslip, too. Here are some common examples.
Payroll number
A payroll number is just how your company’s payroll department identifies each employee.
Tax period
This is the tax period for an individual payslip. So, if you’re paid monthly, an ’01’ tax code means April, because April is the first month of a new tax year.
Tax code
Your tax code determines how much tax you pay. It’s set by HMRC, but you can query it if you think it’s wrong. Making sense of your tax code is an important part of understanding your payslip.
Pension contributions
If you make any workplace pension contributions, you’ll see them on your payslip.
Does your employer contribute to your workplace pension? If so, you’ll see their contributions on the payslip, too.
Student loan repayments
Student loan repayments come off your wage at source, so they’ll show up on your payslip. The payments usually start the April after your graduation date, or the day you left your course.
Extra pay
If you receive extra payments like bonuses, commission, sick pay or maternity pay, they’re recorded on the payslip. This makes it easier for you to keep track of different payments and income sources.
Finally, a payslip can also include details like your pay rate, your National Insurance (NI) number and the date the payslip was issued.
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How do I query my payslip?
It’s good practice to check each of your payslips as you receive them. If you don’t understand your payslip or if you think you’ve been paid incorrectly, ask someone in human resources (HR) or payroll for help. If it’s a problem with your tax code, they might need you to contact HMRC yourself, but you should still check with your employer in the first instance.
Don’t be afraid to query your payslip – mistakes do happen!
Should I keep my payslips?
It’s a good idea to store them away. You might need recent payslips to apply for, say, a mortgage, or you might need to go back and check an old payment.
If you have paper copies, be sure to store them somewhere safe and secure, like a locked drawer.
Understanding your payslip
Essentially, a payslip gives you a clear picture of your take-home pay each month. Not only is it something you’re legally entitled to, but it can help you budget your money and set some financial goals. Check each payslip carefully and remember, don’t be afraid to flag up any concerns you have with HR.
If your employer won’t give you a payslip, contact Acas or Citizens Advice for more help.
