In the UK, payday is almost feted as if it were a bank holiday.
I mean, what's not to like? Bank accounts get a hearty refill and we're all emboldened to go out and frivolously spend our hard-earned cash.
Even our banks are getting in on the act too! Monzo has even started sending specific "payday notifications" to users.
However, once the money has been received, very few of us actually take the time to consult what is printed on our payslip.
Below is a typical payslip and much of the information it contains will also be present on some of your most recent payslips. But how much of it do you actually understand?
While you may be a bit of a payslip expert, a recent study suggested that only six out of every ten UK adults understood the entire contents of their payslip.
But why is this the case? Surely it's within everyone's interest to understand what we're receiving each month and why it may vary?
What’s on your payslip?
Right, let’s start with the basics. Every week or month, depending on when your employer pays you, you will receive a payslip that contains five pieces of crucial information.
1. Gross pay — This is the amount of money paid before any net deductions but after any salary sacrifice deductions.
2. Net pay — This is the amount of money received once the deductions have been taken into account.
3. Deductions — This is the amount of any deductions and they may vary from payday to payday. These are known as variable deductions and include tax, National Insurance and pension contributions.
Within the deductions, there may also be an area titled fixed deductions. These deductions are fixed and don’t ever change from payday to payday—e.g. union fees. However, they do not have to be shown separately on your payslip as long as your employer provides a separate statement with these deductions once a year.
4. Payment method — How the money has been paid—e.g. via bank transfer, cash, cheque, etc.
5. Hours worked — If you are paid at an hourly rate, your payslip must show how many hours you've worked to receive the sum stated on the payslip. If you receive an annual salary, then you will not see this on your payslip except in the situation where you work overtime.
What else can you find on a payslip?
There may well be various other bits of information displayed on your payslip; however, this is often dependent on whether or not your employer chooses to display it and/or whether you’re eligible.
Details such as your personal information including name and home address may be shown, as could a payroll number providing that your company uses that sort of method. The date on which the money is due in your account is often shown too.
Tax information, including the tax period and your personal tax code, is frequently present on payslips, as is your National Insurance (NI) number.
Information relating to student loan repayments can be present on payslips. HMRC will often inform employers on how to work out and deduct the correct amount from your pay.
The Child Maintenance Service (CMS) can also request a Deduction from Earnings Order (DEOs) for the maintenance of a child. If these orders are made as deductions, employers are permitted to charge a £1 administration fee; however, the charge can only be made if a deduction or partial deduction is actually made.
Court orders can be included too. These deductions come directly from your pay and are generally due to unpaid fines or debt repayments that are due to creditors. Court orders are also liable to a £1 administration fee.
Sick pay is another variable that is often present on payslips. Typically, sick pay depends on how much time you have off as well as the company’s sick leave policy. All employers are required to pay Statutory Sick Pay (SSP) if you’re absent from work for four or more days in a row. Depending on the contract that you have, you may also be entitled to occupational sick pay.
Maternity, paternity and adoption pay is a big issue in many companies. If you’re a mother and are off because you’ve just given birth, you will receive Statutory Maternity Pay (SMP). This will be present on your payslip. You may also receive maternity pay; however, this is likely to be shown separately. Paternity pay works in much the same way.
If your company provides health insurance or meal vouchers, these may well be listed on your payslip and are also likely to affect your tax code. Season ticket loans or other travel schemes, such as cycle to work, may also be displayed.
A year-to-date summary of your earnings may also be visible. If so, it will likely show how much tax, National Insurance contributions (NICs), student loans and pension contributions have been paid.
🔐 Keep it safe!
Apart from showing all of the above information, a payslip can also act as an important tool when looking to provide proof of earnings for any self-assessments—e.g. mortgage applications or loan requests.
Because a payslip can have many uses, it really is important that it is understood properly to highlight any potential issues or mistakes with your employer. Furthermore, because payslips contain so much sensitive and personal information, they should all be stored in a secure place where you can access them if ever needed.
What about PayFit?
All UK companies are required to keep payroll information for the current tax year as well as the three previous tax years.
Generally, companies are encouraged not to keep information for longer than they are required to do so by law. This is because it may infringe general data protection regulations (GDPR).
The same GDPR rules apply to PayFit; however, the nature of the software means that employees have far more control and flexibility over their payslips by viewing and downloading them in their personal portal.
PayFit has produced an innovative new payslip design that looks to address the pain points shared by employers and employees. The new payslip features more clarity of information displayed on basic payroll items, increased transparency between employer and employee, tax calculations explained, annual leave summary and better employer branding and more.
Interested in finding out more about the ways that PayFit can help you with your payroll processes? Then why not book a demo with one of our product specialists today?