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Understanding Payslips

what is on a payslip

Employers must provide their employees with payslips as a hardcopy or electronically every time they are paid according to UK law. The payslips will include all deductions made from the gross salary payment including tax, national insurance or pension contributions, alongside detailing your take-home salary.

Read on for more information on what each section of the payslip means so that next time you get one, you can figure out exactly what it’s telling you.

What Is A Payslip?

A payslip is a document that shows how much your employer has paid you for a specific period and acts as proof of income received. For example, if you are paid monthly, you’ll get a pay slip every month and if you’re paid weekly, you will get a weekly payslip. It shows the breakdown of your salary in detail including all the deductions, pension funds, taxes, or allowances.

You should always review your payslip when you receive it from your employer to check if all adds up correctly and is as you expected. If you find anything additional on there that you don’t understand or are puzzled by some of the deductions, always ask your employer to clarify in the first instance. If there is a mistake, they will be able to rectify it on their payroll systems and reissue a new payslip.

Employers have the choice to issue paper or electronic payslips. Electronic payslips are sent by email usually and will often require a unique password specific to you to be able to open them. You may also be given access to an online portal where you can view all of your payslips too. Paper payslips will be issued in person at work or sent to you through the post.

Are Payslips A Legal Requirement?

Now that you must be clear about what a pay slip is, let’s shed light on ‘Are payslips a legal requirement?’. Or is it just up to the employer to make a decision?

According to the Employment Rights Act 1996: All employees should be provided with a payslip on or before the day they get paid. This includes anyone on a zero hour contract or who is working through an employment agency.

People who are not legally entitled to receive payslips include:

  • Self-employed individuals
  • Freelancers
  • The armed forces
  • Merchant seamen and women

What Should Be On A Payslip UK?

Some of the information included on a payslip is required by law, and some will be specific to the company or industry that you work for.

Here is an overview of the information that is usually included:

  1. Payroll Number

When you are paid through a company, you should be issued with an employee number or payroll number. This is a unique number that acts as an identifier for every employee and will always be included on the payslip next to the employee’s name.

You may need to quote your payroll number if there is a query with your slip. This unique number will help the payroll team to find you quickly in the system and put any errors right.

2. Date

Every payslip must include the date that you will be paid on. You should receive your payslip on or before this date.

3. Personal Information

Payslips include personal information of the employee including their name, contact information, address, and insurance number. Aside from this, no other personal information is required by law but may be included depending on your company or department’s payslip template.

If during employment, any of your details change, you must report them to your employer so they can be updated on your payslip when it is next issued. It’s important to have accurate records should you need to use the documents as proof of income for applying for a mortgage or submitting a tax return.

4. National Insurance Number

As a UK employee, you must have an insurance number, also called an NI number. Anyone living in the UK from birth will be issued one on their 16th birthday. This is another unique identifier to you and is the government’s HMRC department’s way of keeping track of the contributions you have made to the social security system and monitoring the state benefits that you’re entitled to, such as a pension.

This number is also used by HMRC for tax identification. If you pay taxes or get deducted from your pay, they are listed under your National Insurance number.

5. Base Pay

Your base pay is the basic amount of pay that you receive each month before any deductions are made. It doesn’t include any overtime or bonuses that you may have earned or any deductions from your pay. Essentially, it’s your basic salary from which everything else is added or deducted from.

6. Gross Pay

Your gross pay is the total amount you will be paid in the period that the payslip relates to. This could be made up of just your base pay, plus any additional bonuses, overtime payments, commissions, or expenses that you will be paid.

7. Tax Period

The Tax year in the UK runs from the 6th of April to the 5th of April the following calendar year. If you are paid monthly, the year will be broken down into 12 tax periods but if you are paid weekly, there will be 52 tax periods – one for every week of the year. You will likely see the tax period shown as a number in a box on your payslip.

8. Tax Code

Every worker in the UK is issued a tax code. This code is generated by HMRC and tells your employer how much you’re entitled to earn before tax is applied. 1275L is the most common tax code and in 2023, this entitles workers to £12,570 tax-free earnings.

Anything above that amount will then be taxed at the basic tax rate of 20%. Until you reach the higher earning bracket. At that point, the tax will be charged at 40% on any earnings over this threshold.

The tax code is made up of numbers and a letter. The letter forms part of a key that tells your employer certain information about you. In the example above, the L indicates that the worker is entitled to the standard tax-free Personal Allowance.

Other letters and their meanings can be found here: https://www.gov.uk/employee-tax-codes/letters

9. Tax Deductions

Your tax deductions are calculated based on your tax code from your gross salary and will be displayed in the tax deductions section of the payslip.

If the tax-deducted amount is higher than what you expected, there might be an issue with your tax code. You can verify it by checking the code online or with HMRC directly. If you observe W1 or M1 at the end of your tax code, it means you are on an emergency tax code. This means HM Revenue and Customs does not know about your income enough so they charge you a higher rate until your details are confirmed.

If you find that you have paid too much tax during the tax year, this can be claimed back from HMRC but you will usually need to wait until the end of the tax year before you can do this.

10. National Insurance Deductions

Another deduction that is made on your payslip is the National Insurance deduction. These deductions are paid into the social system and build up your entitlement to state benefits in later life such as the state pension, NHS care, or statutory maternity pay.

National Insurance payments are made up of:

  • 12% of your weekly earnings between £242 and £967
  • Plus 2% of any weekly earnings over £967

11. Pension Contributions

Every employee over 22 years old must enrol on a workplace pension when they start work. They can choose to opt-out afterwards but must be automatically enrolled initially. This came into force in 2018 as a way to try and boost retirement income in later life.

The pension contributions that you make will be deducted from your gross salary and itemised on your payslip. Pension deductions are usually set up to be a percentage of your take-home pay. You will also see your employer’s contributions to your pension pot listed on your payslip. This will usually be between 1-8%.

12. Pay Year To Date

You will often see the phrase pay ‘TYD’ on your payslip. This shows the amount that you have been paid in the current tax year so far. It’s not required by law, but many employers choose to include it and is based on your gross salary.

13. Net Pay

Net pay is the number that most people look at first on their payslips. This is the final amount that will end up in your bank account after all of the deductions are made. Make sure this figure matches the money that is actually paid out and raise it quickly with your employer if there is any discrepancy.

14. Student Loan Deductions

Not everyone will see this section on their payslip but workers who are repaying a student loan, often have their repayments taken directly from their salary. The amount to be repaid will vary based on the loan amount, percentage repayment value and the amount that you earn.

When Should You Get A Payslip?

Employers are legally required to issue a payslip on or before the day that they pay you for your work. People who are self-employed and offer freelance work are not issued a payslip though. They take care of their own tax affairs so must keep careful records of invoices sent and expenses incurred throughout the tax year.

Does A Payslip Have To Show Hours Worked?

Since April 2019, all payslips should now show the number of hours that you have worked during the payment period if your pay depends on the number of hours that you work. So, if you are paid an hourly rate, your payslip must state how many hours you have worked.

If you receive a set salary regardless of the number of hours you have worked, your payslip does not need to show the number of hours you have worked. However, if you are paid for overtime, the number of hours of overtime that you have worked should be displayed on your payslip.

Do I Need To Keep My Payslips?

It’s wise to keep your payslips in a safe place for at least 5-7 years. You may need them to show proof of earnings for important life milestones like mortgage applications, and credit applications. If keeping paper copies, store them safely in a fire proof wallet and if you’re emailed your payslips, try to keep them filed together in one folder in your inbox for easy reference in the future.

In Summary

Whilst a payslip can initially look a bit daunting, once you understand what all the different numbers, codes and references refer to, they become a useful record of earnings and hold lots of important information that you will need to keep track of your taxes.

It’s important to make sure that the figures on your payslip are accurate and match what is on your bank statement. If you are over or under paid for any reason, flag this with your employer quickly so that they can adjust and rectify in the next pay cycle.

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