How much do you really know about your payslip? There are so many styles and formats of payslips which differ from employer to employer, it can become easier to simply trust your payslip and just take note of your Net pay. However, it’s very important to take the time in understanding your payslip to ensure your take home pay is correct.
The first thing to understand is the difference between your gross and net pay. The gross pay is your total earnings before any deductions have been made, sometimes known as your “taxable pay”. Whereas your net pay is your take home pay left once all deductions have been calculated.
So let’s begin with the two most common deductions, tax and national insurance. It can get confusing with the variety of tax codes, tax brackets and national insurance categories. The standard tax code however for this year is 1100L. If you hold a standard tax code, this means you have a tax free allowance on £11,000 for the year. Since the introduction of PAYE, tax free allowances are broken down to match your pay frequency throughout the year. For example, if you are paid weekly, the £11,000 gets divided by 52 to give a weekly allowance of around £211.53. Most people will be on the standard tax rate at 20% on earnings over their allowance, however there is a higher rate of 40% and an additional rate of 45% for certain tax codes and thresholds. Unlike tax, National Insurance is calculated per payslip and is non-cumulative. Again most people will be on the Primary Threshold (PT) which means you will contribute 12% on earnings above £155 for weekly pay cycle and earnings above £672 for monthly. These two deductions will usually be visible together on the right hand side of the payslip.
When you are employed, your company or payroll provider should have provision made for pensions. The Auto enrolment can be deferred, for example, ePayMe defer auto enrolment for 3 months. Automatic enrolment was first introduced under the Pensions Act 2008, in which every employer in the UK must put certain, eligible staff into a pension scheme and contribute to it. Employers are able to choose the pension provider to use, therefore the rates of the contributions can differ. Similar to the tax and NI, pension contributions can usually be found on the right hand side of your payslip.
Another common deduction is for repaying a Student Loan, if you are due to start contributions towards a student loan, you will normally be notified in advance via a letter. Depending on which plan you are on will determine how much is deducted. For example, on plan 1 you will only contribute 9% of earnings over £336 a week. Employers are informed of any changes to a student loan by HMRC through an automated system, so you as an employee will not have to worry about keeping up-to-date with how much you are due to re-pay.
If you are working as a contractor or agency worker in the UK and having your payments processed through an outsource payroll provider, you are required to contribute to both employee’s and employer’s National Insurance. In which your contributions towards employer’s NI will be listed separate to your employee’s. You will also see a deduction for any administration fee’s charged, usually agreed in advance with your provider of choice. These deductions will most likely be shown in a separate box to your standard employee deductions.
Here at ePayMe we certainly appreciate how confusing a payslip can look as there can be so many variances in both the deductions themselves and how they are shown. That’s why we have a dedicated customer service team to help you with whatever query you may have. If you do have any queries regarding your pay, please do not hesitate in giving us a call on: 01252 863 700.
Cath Adams, Payroll Manager