Payslips, either physical or electronic, must be provided to all employees in the UK each time they are paid according to the law in the UK. The payslips should include all variable deductions such as tax and national insurance contributions, pension contributions, student loan repayments, and show the employee exactly what their take-home pay is at the end of those deductions i.e. the money that the employee will actually receive in their bank account when all is said and done.
Read on for more information about what each section of the payslip means so that as an employer you can answer any questions your employees may have in the future.
Table of Contents
What Is A Payslip?
A payslip is a document that every employer in the UK must provide their employees whenever they are paid. It should show their gross pay (their pay before any deductions such as income tax and national insurance) and their take home pay – proving what they earned each pay period.
It’s your job as the employer to provide a payslip that is completely accurate – it should include their basic pay, any overtime earned, or if they have been off work, any statutory sick pay, occupational sick pay, maternity/paternity pay, or statutory adoption pay, depending on your employee’s situation.
It’s then your employee’s job to check over their payslip each time and come to you with any discrepancies, and to discuss any issues or confusion they’re facing with you. Any issues should be corrected promptly and a new payslip issued.
Payslips can be issued electronically or in paper form. Electronic payslips should be delivered via email or a HR platform that all employees have access to. Paper payslips should be handed to employee’s personally or else delivered in the post.
Are Payslips A Legal Requirement?
Yes, payslips are a legal requirement under UK law – no matter the payment method. Most employees these days will be paid via a bank transfer, but some industries may still operate using cash payment methods. If that’s the case, a payslip is still required.
According to the Employment Rights Act 1996: All employees should be provided with a payslip on or before the day they get paid. This includes anyone on a zero hour contract or who is working through an employment agency.
People who are not legally entitled to receive payslips include:
- Self-employed individuals
- Freelancers
- The armed forces
- Merchant seamen and women
What Should Be On A Payslip UK?
There is certain key information that must be included on all payslips.
Below we’ll look at some of that key information so you know what to include on payslips for employees and so they know what to expect from you as an employer.
1. Payroll Number
If you’re a company paying your employees each month, then you should provide them with a payroll or an employee. This number should be unique and acts as a key identifier for every employee – this should feature on the payslip next to or near the employee’s name to help identify individuals accurately.
If ever there is a problem with pay, then the payroll number will help you quickly identify the individual and help you sort any issues out as quickly as possible.
2. Date
Every payslip must include the date that you will be paid on. You should receive your payslip on or before this date.
3. Personal Information
Personal info including:
- employee name
- contact info
- address
- insurance number
No other personal information needs to be included on the payslip, but you might choose to include slightly more such as department information depending on what you find useful at your business.
Any changes to an employee’s details must be updates as soon as possible so that the next payslip accurately reflects the update. Accurate records are important should an employee require the payslips for use as proof of income or when submitting an additional tax return.
4. National Insurance Number
Every UK employee needs a National Insurance (NI) number. Everybody living in the UK is given a National Insurance number on their 16th birthday, marking their ability to work. This number is completely unique to everybody and is the main way that HMRC will keep track of National Insurance contributions and any state benefits you’re entitled to.
NI numbers should be displayed clearly on a payslip as this can also be used by HMRC for tax identification – displaying this on a payslip makes things much easier for HMRC and employees alike.
5. Base Pay
Your base pay is the basic amount of pay that you receive each month before any deductions are made. It doesn’t include any overtime or bonuses that you may have earned or any deductions from your pay. Essentially, it’s your basic salary from which everything else is added or deducted.
6. Gross Pay
Your gross pay is the total amount you will be paid in the period that the payslip relates to. This could be made up of just your base pay, or your base pay plus any additional bonuses, overtime payments, commissions, or expenses that you will be paid.
7. Tax Period
In the UK the tax year runs from the 6th of April to the 5th April the next year, before a new tax year begins. If you’re paid every month in the UK, then your tax year is broken down into 12 tax periods.
The tax period should be displayed clearly on a payslip in order to make it clear exactly which tax period the pay relates to. This makes things easier for record keeping for all parties who might be interested.
8. Tax Code
Each worker in the UK is issued a tax code. This is generated by HMRC and each tax code represents your employee’s unique circumstances and tells you as the employer exactly how much tax ought to be applied and to what amounts.
For example, the most common tax code in 2024/25 is 1257L, which shows employers that an employee is entitled to £12,570 in tax free earning, meaning tax will only be applied to anything over this amount.
There are multiple tax brackets in the UK based on the following for the 2024/25 tax year:
| Band | Taxable income | Tax rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | over £125,140 | 45% |
Other letters and their meanings can be found here: https://www.gov.uk/employee-tax-codes/letters
9. Tax Deductions
Your tax deductions are calculated based on your tax code from your gross salary and will be displayed in the tax deductions section of the payslip. This is probably the most important section for employers and employees alike to understand.
If the tax-deducted amount is higher than expected, there might be an issue with the tax code. You can verify it by checking the code online or with HMRC directly. If you observe W1 or M1 at the end of your or your employee’s tax code, it means an emergency tax code has been applied. This means HM Revenue and Customs does not know about your income enough so they charge you a higher rate until your details are confirmed and they can put you on a tax code that’s more appropriate for your circumstances.
If you find that you have paid too much tax during the tax year, this can be claimed back from HMRC but you will usually need to wait until the end of the tax year before you can do this.
10. National Insurance Deductions
Another deduction that is made on your payslip is National Insurance. These deductions are paid into the social system and build up your entitlement to state benefits in later life such as the state pension, NHS care, or statutory maternity pay.
National Insurance payments are made up of:
- 12% of your weekly earnings between £242 and £967
- Plus 2% of any weekly earnings over £967
11. Pension Contributions
Every employee over 22 years old must be enrolled in a workplace pension scheme when they start work under UK law since 2018. They can choose to opt-out afterwards but must be automatically enrolled initially. This came into force as a way to boost retirement income in later life.
The pension contributions that you make will be deducted from your gross salary and itemised on your payslip. Pension deductions are usually set up to be a percentage of your take-home pay. The employer’s contributions to the pension pot should also be listed on the payslip. This is typically between 1 and 8% depending on the scheme.
12. Pay Year To Date
You will often see the phrase pay ‘PYD’ on your payslip. This shows the amount that you have been paid in the current tax year so far. It’s not required by law, but many employers choose to include it as a way to summarise the employee’s pay so far. This is usually based on gross salary.
13. Net Pay
Net pay is the number that most people look at first on their payslips. This is the final amount that will end up in your bank account after all of the deductions are made. Make sure this figure matches the money that is actually paid out and raise it quickly with your employer if there is any discrepancy.
14. Student Loan Deductions
Not everyone will see this section on their payslip but workers who are repaying a student loan, often have their repayments taken directly from their salary. The amount to be repaid will vary based on the loan amount, percentage repayment value and the amount that you earn.
A Note On Fixed Deductions
Fixed deductions are unlike the deductions we discussed above. These are deductions that don’t change and will be deducted from the employees pay each time. They don’t have to be included on a payslip, but must still be given in a separate statement known as a ‘standing statement of deductions’ showing what the deduction is for, how much is being deducted from the pay each time, and how long for.
It is your job as an employer to make clear what these fixed deductions are if you don’t include them on the payslip. An example might be health insurance, that all employees are signed up to when they work with you if they choose, but that is taken, at a reduced rate, directly from the employee’s salary each month.
When Should You Get A Payslip?
Employers are legally required to issue a payslip on or before the day that they pay employees for their work. People who are self-employed and offer freelance work are not issued a payslip – they take care of their own tax affairs so must keep careful records of invoices sent and expenses incurred throughout the tax year.
Does A Payslip Have To Show Hours Worked?
Since April 2019, all payslips should show the number of hours worked during the payment period if your pay depends on the number of hours that you work. So, if you are paid an hourly rate, your payslip must state how many hours you have worked.
If you receive a set salary regardless of the number of hours you have worked, your payslip does not need to show the number of hours you have worked.
Do I Need To Keep My Payslips?
It’s wise to keep your payslips in a safe place for at least 5-7 years. You may need them to show proof of earnings for important life milestones like mortgage applications, and credit applications. If keeping paper copies, store them safely in a fire proof wallet and if you’re emailed your payslips, try to keep them filed together in one folder in your inbox for easy reference in the future.
In Summary
Understanding payslips is important for both employers and employees.
For employers, it shows your legal obligation and allows you to create a payslip format that works for your employees and ensures all relevant information is displayed.
For employees, it’s the best way to keep track of what you earn and what’s deducted due to tax and national insurance contributions, etc.
Ensuring the figures on a payslip add up is important in making sure all records are accurate and all pay is correct. If there are any incidents of over or underpayment then this should be corrected immediately to rectify the pay for the next pay cycle so employer and employee are on the same page with their respective record keeping.
