Opening your payslip can come with a real mixed bag of emotions. All too often, it can go a little something like this:

“Yes! I’ve been paid! Wait a minute, that’s not the amount I was expecting… they’ve taken how much for tax? And what’s that for? Surely that can’t be right… and what does that code mean?”

Sound familiar?

That little slip of paper (or PDF, it’s 2019 after all) can be really confusing. But generally, as long as they’ve got your hours right, you’ll file it away and forget about it, because you’re sure the boss has got you covered. True?

Whilst we’re pretty sure your employer’s finance department know what they’re doing, it can’t hurt for you to be able to interpret those tiny hieroglyphics inscribed on your payslip, or for you to be 100% sure that you’re being paid the right amount. So, in an effort to help you understand this confusing yet vital piece of paper, we have created this go-to guide. We hope it helps you feel a whole lot more confident next payday.

Get to Know It - UK payslips must contain the following information:

  • The total amount you’ve been paid before compulsory deductions have been made (your gross pay).
  • The amounts of variable deductions taken from your gross pay, and what these deductions are for. These include things like tax and National Insurance (NI).
  • The total amount of any fixed deductions taken from your gross pay. These don’t change from payday to payday, for example union fees.
  • The total amount of pay you take home after deductions (your net pay).
  • The amount and method for payments. If your employer has paid you part cash, and part bank transfer, for example, that has to be made clear on your payslip.

Understand your payslip

The below is a basic, UK payslip. It’s been numbered to help you recognise and understand the different things written on it, and each number corresponds to an explanation below.

UK payslip

1. Your Payroll Number

Your payroll (or employee) number is the number used by your employer to identify you for payroll purposes. If you have an issue with your pay and need to speak to your employer about it, it’s useful to have this to hand.

2. Your Personal Information

Your name and sometimes your home address will usually be shown on your payslip. Remember to keep your employer updated if either of these things change as they’ll need to update their records.

3. The Date

The date on your payslip is usually the date that your pay will be credited to your bank account. Legally, you should receive your payslip on or before this date.

4. Your National Insurance (NI) Number

Your National Insurance (NI) number is the number used by HMRC (Her Majesty’s Revenue and Customs, in case you’re interested) to differentiate you from everyone else in the UK.

It ensures that any tax and national insurance contributions you make are recorded against your name, and helps you to build up your entitlement to state benefits, like pensions. In essence, it’s like a personal account number, and it stays the same throughout your entire life, even if you change your name. You must have a NI number to work in the UK.

7. Your tax code

Your tax code tells your employer how much tax-free pay you should get before they start deducting tax.

Most people in the UK who have one job or pension are on the tax code 1150L (according to GOV.UK). If you are on this code, it means that in that tax year, you can earn up to £11,500 before you start paying tax. Once you earn this amount, HMRC will start deducting a percentage of whatever you earn on top of this, and the percentage they deduct will depend on how much they expect you to earn that year.

Currently in the UK the basic tax rate is 20%, and you will pay basic tax rate if, like most people in the UK (according to the ONS), you earn less than £45,000 a year.

Basically, this all boils down to the fact that currently in the UK, 20% of the amount you earn between £11,500 and £45,000 is deducted for tax.
This information covers the majority of hourly workers’ tax codes, but if yours is different, check it at GOV.UK. If your tax code is wrong, you could end up paying too much or too little tax, so it’s really important that you check it regularly.

8. Tax deductions

This figure tells you how much tax has been deducted from your gross pay. As mentioned above, this amount is determined by your tax code.
If you are earning less than £45,000 a year, it should never be more than 20% of your gross pay, but generally should be significantly less than that.

To help you understand how tax is deducted, here’s a quick example:

Gemma earns £8.00 an hour and works approximately 30 hours a week. She is paid weekly, and this is her only job. Her tax code is 1150L, which means she has a tax-free allowance of £11,500 a year.

HMRC expect Gemma to earn £12,480 a year ( £8.00 x 30 hours x 52 weeks). They will deduct tax on the income she earns above £11,500, which in Gemma’s case is £980.

Gemma’s tax deductions over the year will be 20% of £980, which is £196.

This will be spread out over 52 weeks, so Gemma will get taxed £3.77 a week.

If you think you are being taxed too much, check your tax code. Codes to look out for include any that end with ‘W1 or M1’, as these are emergency tax codes which are applied when HMRC has insufficient information about your income and tax details.

If you have a second job, you might find that your tax code is BR, which stands for Basic Rate. If your tax code is BR, all of your income from this job will be taxed at the basic rate of 20%, as HMRC assume your tax free allowance has been used up when determining tax deductions for your primary job. If this is not the case, you should contact HMRC.

If you have paid too much tax, don’t worry. Overpaid tax can be claimed back at the end of the year by getting in touch with HMRC.

9. National insurance (NI) deductions

National Insurance (NI) contributions are deducted from your pay if you are an employee earning more than £157 a week. The government uses these contributions to pay for things like pensions and maternity allowance.

NI is deducted at a rate of 12% of your earnings above £157 a week, and 2% of your earnings above £866 a week.

To help you understand, we’ll use Gemma as an example again:

Gemma earns £240 a week (£8 x 30 hours). This means she earns £83 a week over the NI threshold of £157.

Twelve percent of this £83 is £9.96, so Gemma will pay £9.96 a week in NI contributions.

10. Pensions

If you’re paying towards a workplace pension the amount you’re contributing will be shown here.

By 2018 all employers must provide a workplace pension scheme, enrol you into it, and contribute towards it if:

  • you’re classed as a ‘worker’
  • you’re aged between 22 and State Pension age
  • you earn at least £10,000 per year
  • you usually work in the UK

However, you are able to ‘opt out’ of this pension scheme if you wish. For more information on pensions, see GOV.UK

11. Summary of year to date

Some payslips will show how much you have been paid in the current financial year. They might also show you how much in total you have paid in tax and NI.

12. Net pay

This is arguably the most important figure on your payslip, as it tells you the amount that you will take home after deductions are made. It’s a good idea to check this against your bank statement to make sure you’ve been paid the correct amount.

Challenge It!

If you’ve read this guide and you’re concerned that your pay isn’t quite what it should be, don’t be afraid to speak up. Take your payslip to your employer’s payroll department and talk to them about your concerns - that’s what they’re there for! Employing hourly workers can be challenging for even the most well intentioned of payroll departments, and sometimes honest mistakes happen. They can’t fix it if they don’t know about it.

That being said, if your employer seems to have trouble tracking your hours, why not tell them about Planday? Our easy-to-use app has a punch clock facility that allows you to clock in and out of work using your smartphone, so when you use it, you can be sure that you’re going to get paid for all of your hard work when payday rolls around.

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