Receiving your payslip each month is an indication of how much you get paid for the job that you do. However, there’s a lot more to your payslip than merely your salary.
It consists of deductions, important personal information, and various acronyms that may or may not mean something to you.
In our payslips explained article, we run through each of the sections you will find on your payslip and reveal what they are and why they’re important.
By the end of this article, you will be able to read and better understand your monthly payslip easily, which we hope will help you improve how you manage your salary.
How to Read Your Payslip?
Although every payslip is not the same, the fact is that they look similar and typically consist of the same information from one company to another. Fundamentally, your payslip will have the following details:
· Employee name, number (this helps with finding your payroll number), date of issue, and address
· Your National Insurance number
· The rate of your basic pay
· List of deductions (tax, national insurance, student loan, etc.)
· Totals within the period
· Totals within the year
· Net pay
Finding the net pay on the payslip is easy, as it’s indicated at the bottom of the slip. The information enclosed above helps you to understand how your salary is comprised.
How to Find Your Payroll Number
Every employee has a payroll number within a company, which helps the accountancy team identify each person regarding salary payments.
You can find your payroll number at the top left of your payslip, and it’s helpful to note this for future reference.
The issuance of a payroll number is not a legal requirement, even though it’s standard practice at most companies, particularly those with sizeable teams.
Personal Information on Your Payslip
There are several pieces of personal information on your payslip that you need to be aware of:
· Payroll number: As explained above, your employer will issue you a payroll number to make it easy to identify you within the company system.
· Tax code: HMRC issues every person with a tax code, which indicates how much tax you’re liable to pay each year. You need to contact HMRC directly if you think you have been issued an incorrect tax code.
· National Insurance number: This is your unique NI number, and HMRC uses it to track the tax you pay each year.
Your Payslip Earnings Explained
Of course, the most important section on your payslip is your earnings. Helpfully, HMRC splits your earnings into the following areas:
This is simply your salary and is listed before any additions like overtime, or bonuses are added.
Some companies offer overtime pay for working extra shifts or weekend hours. These are usually offered at a different pay rate, so they are categorised under overtime earnings on your payslip.
If your company has a bonus or commission scheme, you will find any bonus earnings listed as such on your payslip.
While off sick, you might be entitled to statutory or occupational sick pay, which will be listed on your payslip.
If you have recently welcomed a child into your family, you will be issued with a stipulated period away from the office, known as maternity/paternity leave, and your earnings will be listed in this section of your payslip.
Payslip Deductions Explained
Unfortunately, you don’t get to keep the entirety of your salary. The deductions on your payslip indicate money that is removed from your earnings to cater for things like tax and pension contributions, as explained below:
All employees earning more than their personal tax-free allowance in the UK must pay income tax, as stipulated by the respective tax codes. This may also appear as “PAYE Tax” on your payslip.
National Insurance contributions are another form of tax levied on workers in the UK. In exchange for NI contributions, you may be able to access benefits like maternity pay and state pension in the future.
Most companies offer a workplace pension scheme, which automatically deducts some of your earnings each month. At the same time, any pension contributions made by your employer will be shown here.
Student loan payments
As a former university student, you must repay your student loan when you earn at least £20,195 per year. Any monthly student loan payments you make will be listed in the deductions section of your payslip.
Totals This Period
Each tax year is split into four periods. The totals this period section of your payslip indicates how much you have earned in these three months and helps you budget your earnings accordingly.
Year to Date Explained
The year-to-date on a payslip indicates how much you have earned in this tax year so far. After 12 months, the year-to-date figure resets as you start making money afresh when the new tax year begins. Note – the tax year runs from 6 April to 5 April.
Useful Payslip Acronyms
If you’re new to payslips, there are lots of acronyms used that can make things seem confusing! To help you, here is an explanation of the acronyms that you will find on your payslip:
Practice understanding your payslip
Understanding and reading your payslip correctly can make a big difference in how you manage your finances. The good news is that UK payslips aren’t too difficult to understand when you cut through the jargon, and take some time to sit down and identify all the different parts of your payslip.
Be sure to check out our blog for more budgeting and finance tips to help you stay firmly in control of your finances throughout the year.