Knowing how to read a payslip means you can better manage your money. While payslips vary depending on your job and the country you’re based in, they tend to include similar information. If you can understand your payslip you can budget more effectively which means reaching your savings goals quicker. Here’s what you need to know to make sense of your payslip so you can keep track of your finances.Table of Contents
What is a payslip
What information is on my payslip?
How to get a payslip online
When should I receive my payslip?
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What is a payslip?
As an employee, you’re legally required to receive a payslip each time you’re paid by your employer. Essentially, a payslip tells you how much money you make before tax and any additional deductions (your gross income), and how much money you make once that money has been deducted (your net income).If you’re a freelancer, it’s unlikely that you’ll receive a payslip as you’ll be issuing invoices instead. But, if you’re employed and want to understand your payslip, here’s a closer look at the information all payslips generally contain.
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Hours worked—the number of hours you’ve worked since you received your last payslip
Your tax code—your personalized tax number issued by your country’s tax authority
National Insurance number—your personalized insurance number issued by your country’s pensions authority
Pay rate (annual or hourly)—how much you’re contracted to make on an hourly or yearly basis
What’s the difference between gross and net pay?
The most important pieces of information on your payslip are your gross and your net pay. The difference between the two is as follows:
Your gross pay is the total amount of money your employer issues you before any tax, National insurance, or additional contributions (i.e. voluntary pension payments) have been deducted from it.
Your net pay is the remaining sum of money you receive once all of these deductions have been made. This is the amount you’ll actually receive once your payslip has been issued. As a result, your net pay is sometimes referred to as your take-home pay.
What does “deductions” mean on my payslip?
On your payslip, there’ll probably be multiple deductions taken out of your gross pay. These are generally split into two categories:
Variable deductions—these vary from payslip to payslip and include any tax and National Insurance payments.
Fixed deductions—these payments stay the same from paycheck to paycheck and include things like any contributions to your union. However, it’s important to note that your employer isn’t legally obliged to explain what these deductions are. As long as your employer provides you with an overview of each of these deductions in a separate statement at least once a year, they’re legally covered.
What does “accrued” mean on my payslip?
‘Accrued’ simply refers to the number of holiday days you’re entitled to based on how much you’ve worked up until the issue of the payslip. How your holiday days are calculated differs from employer to employer. However, your accrued holiday entitlement is usually displayed in one of two ways:
A single number estimate which displays how many days of holiday you’ve got left to take within the year plus any additional days you’re estimated to accrue before the end of the year.
The above but displayed as two separate numbers. So, you’ll be shown the number of holidays you’re entitled to take before the end of the year as one number and any estimated holiday days that you’ll accrue in the future as a separate number.
How to understand the rest of my payslip
In addition to the above, you may find that your payslip contains some additional information such as:
Your tax code (the number used by your employer and financial authority to deduce how much tax-free income you can make)
National insurance number (the number used to ensure your NI and tax contributions have been accurately attributed to you)
How much you’re being paid (including overtime and bonuses)
The method of payment (for example, in cash or directly credited to your bank account)
How to get a payslip online
Whether you can get your payslip online depends on your employer. But, there are plenty of online payslip platforms out there such as Workday and Asanify that digitize the payroll process. If you’re currently only receiving your payslip in paper form, you could suggest that those in charge of the payroll at your company start using such software to make managing your payslips easier.
When should I receive my payslip?
Depending on how often you’re paid, you should receive your payslip either weekly, bi-weekly, or monthly. Legally, you should always receive your payslip either before or on the day you receive your wages. This gives you enough time to understand exactly how much you’re being paid and why so you can flag up any issues with your payroll department if a mistake has been made in the accounting.
When you should receive your payslip in the mail
You should receive your payslip in the mail either just before or on the day that you receive your wages. Of course, if you receive your payslip in the mail, you’re subject to any postal delays on account of poor weather, strikes, or the payslip getting lost in the post.
When you should receive your payslip online
Receiving your payslip online is, in theory, much more reliable than receiving it by post. That’s because it bypasses the process of going through the postal system. If your employer does issue your payslips online, you should receive it either just before or on the day of being paid.
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