Understanding Your Payslip

Understanding Your Payslip

Whilst we receive one at the start of each payday, a payslip is something that can easily cause some confusion.

With so many different numbers and a lot of legal jargon, we don’t blame people for not knowing what exactly everything means.

If you are just receiving your first payslip or are still puzzled by some aspects, we’ve decided to break down the basics and give you a better understanding of what’s on this important slip of paper.

What Is A Payslip?

Put simply, a payslip is a slip of paper that shows how much you have been paid, but there’s more to it than that.

Every working employee is entitled to receive a payslip either just before or on the day that they are scheduled to be paid. Having the right to a payslip isn’t reserved for only full time employees, but part time and relief members of staff as well.

Payslips have traditionally been given on paper, but are now transitioning to mostly through emails or on a website as we enter a more digitally driven age.

As well as stating the amount of money that is being transferred into your bank account, a payslip will also detail any deductions in pay, tax codes and how much money you have earned in the current tax year.


What Information Should Be Included?

As we’ve stated, a payslip includes more than just the money you’ve earned by working throughout the month, and legally has to include certain pieces of information.

The most important thing that a payslip needs to include is the total gross pay and the net pay. This is the amount of money you are due to be paid, and the whole purpose of a payslip.

A payslip will need to state any deductions such as income tax, NI and pension. A payslip will also include personal information such as your name and potentially address, your payroll number, tax code and National Insurance (NI) number, and the company name as well.

As well as tax and NI, there are potential deductions to take into account such as student loans, childcare vouchers and health insurance. Like other deductions, these will automatically be taken from your gross pay and the amount will be broken down on the payslip. You should also see details of any bonuses or extra pay for any overtime worked.

While not essential, most payslips will also show gross to date, taxable gross, tax to date, hourly rate (if applicable) and employer’s pension.

If you’re confused by any of the terms we’ve just mentioned, keep reading for a breakdown.

How Important Is A Payslip?

Payslips are very important for employees and shouldn’t be treated simply as a piece of paper showing how much you have been paid.

As well as providing proof of payment and breaking down the individual numbers, a payslip can be a useful document to show when applying for loans or mortgages. Payslips are physical proof that you have financial stability and are earning a certain amount each month, and most agencies will want to be assured of that before any further steps are taken.

It may initially seem pointless to keep these pieces of paper, but it’s crucial that you don’t throw them away. We recommend keeping them organised in a folder in a secure location in the house, allowing you to locate them whenever you need them.


Explaining The Terms

With the amount of numbers and information on your payslip, it can be a little confusing to figure out the things you need to know. Here is a short breakdown of some of the common terms used throughout.

Gross Pay is the full amount paid before any deductions such as National Insurance and tax have been taken out, and Net Pay is the amount that you take home after all deductions.

Income Tax is an amount of tax that comes out of your wages and depends on the amount you earn each month and your Personal Allowance. PAYE (also known as Pay As You Earn) is the system that most UK workers pay their income tax through.

The amount of money you have earned before tax in the tax year is called Gross To Date or sometimes shown as YTD (Year To Date). A tax year will run from 6th April until 5th April.

National Insurance is something that every worker over the age of 16 has to pay, and helps to build up entitlement to certain benefits such as State Pension and Maternity Allowance. It is a separate contribution to income tax, so don’t confuse the two.

Every person is given a NI Number and it stays the same for your whole life, regardless of any name changes. You are legally required to have a NI number to work in the UK, so it’s an important thing to have.

Your Tax Code tells the company how much tax you should be paying, and will be sent to you by HM Revenue & Customs (HMRC). It’s always a good idea to check your tax code, as having the wrong one could lead to you paying too much tax.

In the event of discovering a wrong tax code, you’ll need to phone up HMRC and explain the situation, often receiving a tax rebate shortly afterwards. Having the wrong tax code can often be the result of changing jobs, with HMRC putting something called an “emergency tax code” before you hand your P45 to your new employer.

State Pension is income paid by the Government to anyone who have received the applicable age and is funded by National Insurance contributions made. A Pension Scheme through work will provide you with additional income when you reach the applicable age, and is funded through your income throughout your working life.


After reading through this guide, you should now have a better understanding about all of the information that is included in a payslip and what it all means. As we’ve seen, payslips are very important so be sure to keep a hold of yours – you never know when you might need it.

If you struggle or need any help with payroll services, please get in touch today. Wurkplace offers a professional, friendly and efficient service for any businesses seeking help with their payroll systems.

We can assign an individual payroll professional to asses your existing payroll systems and propose a solution to meet your business needs.

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