Understanding your payslip
As an employee, sometimes it’s not clear what everything actually means on your payslip. To support National Payroll Week and help educate the nation, we’ve created a list of some of the most common terms that can appear on your payslip, along with an associated description.
Money owed for an underpayment in the past. This may have been because of a mistake made by you or your employer, or a past entitlement that missed the payroll deadline. Back pay is a common method of payment for a raise in salary that has been backdated to an earlier date in the year.
Extra pay awarded because sales or targets have been achieved. This could be a contractually agreed payment or discretional by the employer.
Your company may pay expenses owed to you through your normal payroll. They are paid by your employer as reimbursement for expenses you have incurred due to your work e.g. travel to a client meeting. These expenses must be related to your job or business for them to be non-taxable.
First Aid Allowance
If you are a designated first aid officer your employer may pay you an allowance. This payment is treated as earnings and therefore is subject to Income Tax and National Insurance.
GAYE (payroll giving)
This where you have voluntarily agreed to donate to a charity or multiple charities via your employer. Your donation is taken from your pre-tax salary.
Your total pay before anything has been taken off, like tax and National Insurance or other deductions.
This could be for holiday soon to be taken, or to pay for holiday accrued that was not taken but owed and now paid as you are leaving employment.
The amount of tax due from your pay this pay period prescribed by government. Tax is calculated only on your taxable pay. Taxable pay is your gross pay minus any pay elements that are not subject to income tax, like your pension contributions or payments made to a charity through GAYE.
This deduction is in respect of any loans that your employer has provided you, and for which you have agreed to repay over a specified period. This could be for travel, education, or other related benefit/support.
If you are a mother who isn’t at work because you’ve just had a baby and you’re getting Statutory Maternity Pay (SMP), this will be shown on your payslip. You may also receive additional maternity pay from your company which will usually be listed separately.
National Insurance (NI)
National Insurance is a system used in the UK to gather contributions paid by employees and employers towards the cost of certain state benefits, like the state pension. The National Insurance that comes out of your pay depends on how much you earn and what NI category you are given.
The amount you receive once all deductions have been taken off, i.e. what is paid into your bank account, your total ‘take home’ pay.
This is the category of National Insurance being used to calculate your National Insurance contributions. Category A is the standard letter used for someone between 16yrs and state retirement age. Different letters mean different rates of contribution payable.
Every National Insurance contributor is allocated a NI number as a unique identifier. It consists of two letters then six numerals then one letter. You have to have an NI number to work in the UK.
This is payment for working above your contractual hours. This may be paid with a premium. This may show in the title, so overtime at double time could be shown as Overtime DT, or O/T x 2.
Overtime can be paid at a flat rate. It might also be paid at other rates such as time and a third, time and half or even triple time. This will depend on your contract of employment. Normally only additional rates of pay would show under this element.
What you have earned before any deductions have been made.
If you are paying towards a workplace pension that your company has set up or arranged access to, the amount you’re contributing will be shown. If your employer is contributing too, that may also be shown.
PILON (pay in lieu of notice)
Money paid to you when employment is terminated without notice, instead of the employee working through a notice period and receiving pay in the normal way.
SAYE (Save As You Earn)
This deduction will be shown if you have entered into an employer savings scheme.
Extra premium payment made because you are working hours that are considered special or unsociable such as overnight or weekends.
Statutory paternity pay
This might be shown as SPP on your payslip. The rate of pay is set by the government and normally changes each April. This is pay that an employee can receive whilst taking paternity leave providing certain conditions are met.
Statutory sick pay
This might be shown as SSP on your payslip. The rate of pay is set by the government and normally changes each April. This is pay that you are entitled to if you are off work sick for four days or more in a row, and you meet certain conditions. SSP is treated like the wages or salary it replaces, so deductions will be made in respect of tax, National Insurance, student loans and so on.
If you have received a student loan whilst studying you must repay this amount through your earnings. Repayments start the April after you leave higher education and once your income reaches a certain threshold. For the 2014-2015 tax year this is £16,910 per year.
Summary of the year to date
Some payslips will have a section which shows how much you have been paid so far in the current financial year (6 April to 5 April). It might also show totals for how much you have paid in tax, National Insurance, student loans and pensions.
A tax code is used by your employer or pension provider to calculate the amount of tax to deduct from your pay or pension. The code will be a number and a letter. If you have the wrong tax code you could end up paying too much or too little tax.
Go to HMRC for common tax code letters and what they mean.
If there is something that you aren’t sure of on your payslip, or think that something is wrong, the best people to contact are your payroll or HR colleagues who should be able to help.