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When you get your payslip each payday, are you, like the majority of us, guilty of just filing it away, never to look at it again? Or do you check what you’ve been paid, and then ignore the rest?
While the finer details may not seem all that important, we all have a responsibility to check that the numbers in our payslip add up. After all, we’re each accountable for the amount of tax we pay, and nobody wants to be landed with a bill from HMRC!
The problem is, payslips aren’t always the easiest things to read. There are various sections that, at first glance, might seem completely separate from the rest. And there are usually far more numbers than many of us deal with on a daily basis! So to help you get to grips with your payslip, we’ve explored the topic in more detail below:
If you consider yourself an employee of a business, then you’re entitled to a payslip each time you get paid. This covers everyone, whether your job is a stable 9-5 or more unpredictable casual work. If you’re self-employed as a freelancer or an independent contractor though, you won’t get a payslip from the business you’re working with. This is because they aren’t technically employing you.
Payslips don’t have to be on paper these days, although many of us still like to keep paper records. Some companies send payslips to their employees by email as a password protected file. Others make them available to download from a website. All are perfectly valid methods of sending your payslip, as long as the payslip you receive contains the right information.
There may be a lot of numbers and unfamiliar codes on your payslip. But rest assured, this is not meant to fool you! The amount of detail you get is actually a requirement for the most part. All payslips must show:
As we touched on above, there are two types of deductions that must be detailed in your payslip. These are called “variable deductions”, which are those that could change from payday to payday, and “fixed deductions”, which are deductions which will not change between paydays, no matter how much or little you earn. We’ve looked at both in more detail below:
The two variable deductions that the vast majority of us pay are tax and National Insurance. How they’re calculated depends on how much you earn, and on the allowances granted by the government each tax year. In both cases, you can earn up to a certain amount before you’re required to contribute. The more you earn, the higher thresholds you’ll hit, which will mean that your contribution increases. You can find out more about your contributions and how they’re calculated on gov.uk.
Tax and National Insurance aren’t the only variable deductions we may see on our payslips, though. Pensions, student loan repayments and child maintenance can all be deducted from our salaries as a percentage of what we earn. You can make other arrangements to pay for these things without them going through payroll, but many people find it more convenient to pay this way.
If your employer has a benefits or rewards scheme that allows you to access services that they pay for or contribute to, then you’ll see these contributions on your payslip. Health insurance, dental cover, gym memberships and season ticket loans are all good examples of fixed deductions.
Sometimes your employer will have a code for each benefit you’re making use of, so it may be the code rather than the name of the deduction that you see. If you’re not sure which is which, then it’s a good idea to speak to your HR department.
While there are certain details that employers must include in a payslip, many choose to include a lot of other information that’s useful to you or them. Some examples are:
If anything you see in your payslip doesn’t look right to you, or you don’t understand something, don’t sit on it. It may be nothing, but it could also be something that lands you with a bill from HMRC! Speaking to someone from your payroll department is ideal, but many businesses use external payroll providers so it may not be practical. A colleague from HR or your line manager are likely your best bet in this case.
Remember to keep all your payslips safe, too! That way, you can refer back to them if you need to. Your payslips are also important documentation when it comes to taking out credit, from a mortgage to a short term loan. They show the lender exactly how much you’re earning, and how high your deductions are.
Find a loan with one of the best short term loan brokers. Here at My Financial Broker, we’re here to help you connect with a loan provider when you need money to cover an unexpected expense.