Understanding your Payslip
If you’re employed by a company in the UK, the likelihood is that you will receive a payslip every time your employer pays your wage, so you can understand exactly how much you should be paid, along with any deductions.
But do you really understand your payslip? They can seem quite complicated at first, especially if you’re new to receiving them. It can also be confusing as you figure out why so much is getting deducted from what you should be getting paid.
We’ve created a short guide to help you out on this subject, especially helpful if you think there might be an issue with how you’ve been paid or taxed. Keep reading to find out more about deciphering your payslip.
What is a payslip?
If you are a full-time or part-time employee of a company, you will usually receive a payslip, either in a sealed envelope or a digital version that only you have access to. This shows you exactly how much you should be paid on a monthly or weekly basis, with a breakdown of your hourly rate or even your allocated salary amount.
It will also show you how much you should be paying in tax, if you pay anything towards your pension and if there are any other deductions such as national insurance or your student loan that will need to be paid regularly out of your income.
You will also be able to see lots of other information including your tax code and your national insurance number, which are useful for receiving your wages in the first place.
Why you need to check your payslip
Looking at your payslip on first glance can be confusing, but all of the figures listed are related to how much you should be paid, and how much should be deducted for tax purposes. Understanding your payslip can be useful in the following circumstances:
- If it’s the first payslip you’ve received
- If you think your employer has not paid you enough
- If you’re worried you’ve been assigned the wrong tax code
- If you think too much is being deducted from your pay
Being able to understand your payslip is ultimately very important to find out if you’re being paid fairly, being charged the right amount of tax and discovering any other problems with your pay you should raise with your employer.
Understanding your payslip
You might be used to receiving a payslip already, but have you really taken the time to understand it? The following points of interest will allow you to decipher the numbers included on your payslip, which will come in handy if you feel you’re not getting paid enough, or too much is being deducted every month.
- Payments – this section should show you how much you are paid by your employer. This will look different depending on whether you are paid per hour or you have a salary that is paid in one big chunk of money
- Tax code – this code is assigned to you by HMRC and should dictate how much tax you pay. If you are being taxed too much, it will usually be because you have been assigned the wrong tax code
- Tax period – this refers to a month in the financial year that resets to 1 every April. If you were getting your payslip in October for example, it should show the number 7
- National Insurance number – this is your personal NI number that is assigned to you as a working citizen of the UK. It will be assigned to you when you start working and will stay the same throughout your working life
- Deductions – this refers to any tax, national insurance, pension, student loans or any other payments that have been automatically deducted from your wages.
- Process Date – this will indicate the date when your pay was issued to you. This will be dependent on whether you’re paid at the end of the month, every 4 weeks or every week
- This period – refers to how much you have been paid for the single period, which will depend on whether you get paid every month, every 4 weeks or every week
- Year to date - refers to how much your employer has paid you in the current financial year in the form of Gross Pay (so how much you’ve been paid since April)
What if I haven’t been paid enough?
If you look at your payslip and you have received, what you believe to be, an incorrect amount, then double check your calculations.
If you’re paid per hour, try and ensure you’ve accounted for all days you’ve worked in the previous month, along with any sick days or holidays days that might adjust your final wages. If you receive a salary, your monthly pay should be a 1/12th of your total for the year (before tax is deducted).
Ultimately, if you haven’t been paid enough, you should speak to your employer and more specifically, your line manager in the first instance. You might also have a payroll department you can speak to if you have not been paid correctly.
What if my tax code is wrong?
You might also feel that you are being taxed too much, meaning that you are getting a lot deducted from your payslip on a monthly basis. This can sometimes happen if you have changed jobs recently and you have been put on an emergency tax code.
To rectify this issue, start with checking if your tax code is correct on the GOV.UK site. The page also has useful information on what the tax code letters mean and what are the most common emergency tax codes. If you are on an emergency tax code and have been taxed more than usual, if you let HMRC know, you will usually receive a tax refund.
Start managing your money
Now that you understand what to look for on your payslip, you might want to switch to a current account that will help you organise your pay and ensure you can manage your money effectively every month. Take a look at our selection of current account providers over on our comparison tables and make the switch today! Good luck!
Written by Robert Bester
Published on 25th February 2020