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Understanding your payslip can sometimes feel like you need a PhD in finance.
But it’s integral to making sure you’re being paid what you’re owed and not being taxed more than you should be.
Your payslip should also show you how much of your pay is going towards any outstanding student loans or company ‘pay as you earn’ schemes.
A quick tale
After passing my probation in a job a number of years ago, my new company started to take a portion of my wage to put into a pension for me. According to my payslip, the money was coming out, but upon logging into my new pension account, no money was being deposited.
6 months later this was eventually corrected (after much back and forth between both parties). It turned out one number/letter on my NI number had been missed resulting in the 6 months of funds sitting in financial limbo.
These funds were eventually put into the account and my pension started to run a lot smoother, but had I not been more vigilant and looked at my payslip each month and queried this anomaly, I’d have been over £1,500 out of pocket in my pension, and if the NI typo hadn’t been picked up this could have continued indefinitely.
What is a payslip?
A payslip is a summary of incoming salary and outgoing deductions of each month’s pay from your employer.
It also includes a summary of incoming salary and outgoing deductions from the start of that financial year (6th April), to the most recent pay date.
Your rights to a payslip
All permanent and casual staff are entitled to a detailed payslip that summarises their pay and deductions.
This can either be in paper format, through email or third-party company.
According to the gov.uk website, there a few scenarios where employers do not have to provide a payslip. These are:
- if the individual is a contractor or freelancer (regardless of the length of service)
- if the individual is in the police service
- if the individual is a merchant seaman
- if the individual is a master or crew member working in share fishing
Oddly specific, but there we go.
Let’s break it down
1. Your payroll number
This is a dedicated number attributed to each employee at the start of their employment, and is used by payroll teams to keep track of payments made and deductions taken.
2. Payment breakdown
This is a breakdown of all payments made by the company to the employee, pre-tax (i.e your gross pay). This includes monthly wages as well as any irregular payments such as bonuses, commission, tips, or overtime.
3. Tax period
This is the weekly/ monthly period in which this payslip is issued.
This will depend on whether you’re paid weekly or monthly. For example, if you’re paid monthly and it’s April’s payslip, it will show as something like ‘April – 01’ as this is the first month of the tax year. Likewise ‘March – 12’, as this is the last.
4. Deductions breakdown
This is a breakdown of any money being taken from your gross pay.
This could include pension contributions, tax, NI, or student loans, or any PAYE-based loan or benefits that are paid through your pre-tax wages. For example, if you commute by train, some employers will offer a 0% loan in order to pay your season ticket costs through your wages.
Also shown here is your tax code. This is a very important thing to understand! It shows your employer what rate you should be taxed at and is determined by a whole host of variables including your yearly salary and if you’re in receipt of benefits/ assistance, to name a few.
5. Additional benefits
These are any additional workplace benefits you might receive through your employer, i.e company car or health insurance.
6. Your National Insurance number
This is a number unique to you that helps the government track how much tax you have paid.
7. Your actual (net) pay
This is the money that will be landing in your bank account on pay day.
It’s a sum of your gross, minus taxes and deductions.
8. Your pay pre-deductions
This is a summary of your total pay, pre-tax. Including regular wages, bonuses and commission.