What is Payslip and How Your Salary Is Calculated?
Opening your payslip can be a roller coaster of emotions. The first thing we all do is look for the huge bolded figure at the bottom to see how much money we make.
The items in a payslip can be divided into three categories:
- a basic salary
- Contributions, deductions, and taxes
- Salary (net)
Take a look at the categories that our cheap tax return accountants have listed below to see what information is included in a payslip.
Is it permissible for my employer to give me a payslip?
Yes, indeed! All employees have the right to a payslip under the Payment of Wages Act of 1991.
The Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018 went into effect in April 2019, requiring your employer to give details on the number of hours being paid out on your payslip. The payroll number is also used to identify payroll individuals
However, there are a few exceptions: Contractors and freelancers, for example, are not entitled to get a payslip because they are not recognized as employees.
When should I expect to receive my payslips?
Payslip law further specifies that your employer must provide you with your payslip on or before the day you are paid. This depends on the type of company you work for; some companies pay on the same day every month, while others pay every four weeks.
What are the most important facts I should look for on my payslip?
Payslips in the United Kingdom are required by law to include the following information:
- The whole amount you’ve been paid before any mandatory deductions (your gross pay).
- The number of variable deductions deducted from your gross salary, as well as the purpose of these deductions. Taxes and National Insurance are examples of this (NI).
- The total amount deducted from your gross salary as a result of any set deductions. For example, union fees do not alter from one payday to the next.
- After deductions, the entire amount of pay you receive (your net pay).
- The payment amount and method. If your employer paid you partially in cash and partially by bank transfer, for example, your payslip must reflect this.
How long should you keep your payslip?
While payslips are only required to be retained until you receive your P45/P60, HMRC (HM Revenue and Customs, in case you’re curious) recommends that all employees save their payslips for as long as possible.
You should maintain your records for at least 22 months following the end of the tax year for which you are filing a return. It’s also a good idea to maintain track of payslips that prove pension contributions. Payslips are important to keep for a variety of reasons. You never know when you’ll need them for a rent or mortgage application, or to resolve pay issues later on.
For more details, contact cheap accountants in London.
