A payslip is a document given to an employee either on the day they are paid their salary or at some point before that. The payslip is drawn up and issued by the employer and it includes the details of how much the employee is paid, including deductions that they’re being charged.
However, payslips have more use than just serving as a reminder of how much an employer is being compensated.
Not only do they serve as an official record of an employee’s earnings, but they also provide evidence of employment history, among other things.
What Are Payslips?
Payslips offer both employers and employees accurate records of payments and employment history, as well as records of deductions that are made on the employees’ behalf.
These days, payslips can be issued either virtually, by means of digital payslips, or the old-fashioned way, as printed records.
Depending on the employer, the employee and the relationship between the two, either opinion may be chosen, and in certain cases, some may choose to opt for both as a means of fool-proof record keeping.
What Information Do Payslips Include?
The most important (and obvious) thing that payslips need to include is the amount that the employer is paying the employee, as well as the period of time for which the payment is providing compensation.
For instance, if a permanent employee is being paid their salary for March, their payslip for March will detail that they’re being paid X amount for a period of 31 days, from 1 March to 31 March, or whatever the specific case may be.
That, however, is just the beginning. There are several other details, depending on the employer and employee in question, that are also included on payslips, and they’re not there for fun. In fact, there are legal requirements regarding what is included in a payslip in the UK.
The most important details that are legally required to be included in payslips in the UK include:
- Gross Earnings and Net Earnings: Payslips need to include the employee in question’s gross earnings. That is, the amount that the employer pays them. However, this isn’t exactly what the employee receives. What the employee receives (ie. the number that reflects in their bank account) is their net earnings. Net earnings (or net income) is a term that refers to what the employee receives after deductions have been factored in: thus, net earnings = gross earnings – deductions. Indeed, the payslip needs to reflect both of these figures.
- The Details of Deductions: The details of any and all deductions that are being factored into the employee’s earnings need to be laid out on the payslip. In the UK, some of these deductions are mandatory (like employment tax, PAYE tax and National Insurance deductions). However, there may be additional deductions, some of which are mandatory as prescribed by the company and others that may be optional. These deductions could include a contribution to a retirement annuity (RA) or medical aid.
- Amount of Time Worked: If the employee being paid works on an hourly basis or a non-set amount of time every day or every week, the payslip needs to specify exactly how much they’ve worked. For instance, if they’ve worked 40 hours for four weeks and are paid £20 an hour, they’ll be paid £3,200. However, the payslip won’t just say £3,200, it’ll include all the above details such as the number of hours worked and the agreed-upon hourly compensation.
More from Finance
- Why Cybersecurity Is Now a Top Priority for Private Banks
- Sark: The Last Tax-Free Haven For UK and Irish Residents
- Why Commodity Prices Fluctuate and What It Means for Investors
- Bahrain: The Last True Zero-Tax Jurisdiction or an Overlooked Opportunity?
- Technology And Money: How The World Of Finance Has Changed
- Apps To Help You Save Money On Eating Out At Restaurants
- Best Tools and Software for Oil Trading Analysts
- Can You Trade On The Stock Market Without Investment?
According to UK law, all these details need to be present on employee payslips, along with the date of payment and method of payment.
Other details that may be on a payslip but don’t necessarily have to be there include:
- National Insurance Number and Category
- Tax Code
- Pay Rate
- Breakdown of Gross Pay
- Tax Reference Number
- Employee Number
- Address
- Date of Birth
- Name of Employer
- Bank Details
Concerning the above optional details, it’s up to the employer and company in question as to whether or not they’re included.
What Are the Legal Requirements Surrounding Payslips in the UK?
Other than the information that needs to be present on the payslip, the other main factor involved in the legal requirements of payslips in the UK is who they’re issued to.
All formal employees are legally entitled to regular payslips in the UK. However, this excludes non-formal or non-full-time employees such as freelancers and contractors.
Others who are excluded from this requirement in the UK are merchant seamen, those employed by the national police service and contractors working as crew in share fishing schemes.