Understanding your payslip and income

Getting your first payslip can be confusing and you might look at it and wonder why the amount in your bank doesn't match what you thought you'd be paid. Usually this is easily explained as the amount you're paid, and what is advertised on the job description, doesn't mention the deductions for things like national insurance, pensions or student loan repayments so let's break it down...

If you're an employee at an organisation, you should receive a payslip around the same time as your wages are paid into your bank account. It should show what you've earnt based on the hours you've worked (your gross pay) and your take home pay or net pay which is what you'll actually see landing in your bank after deductions for things like income tax, national insurance contributions etc. If you're receiving UC, your wages can affect how much you receive so it's important to understand your payslips and keep track of your paid.

Additional earnings & holiday

If you've worked extra hours, been lucky enough to get a bonus, or have taken paid holiday, you might see this separated out on your payslip. This give you clarity that you have been fully reimbursed for the hours you have completed.

What is income tax?

Income tax is money that is taken from your earning and paid to the government. This is normally collected automatically through your employer so you don't need to calculate or send it yourself. It is worth checking your tax code though as most people have a personal allowance which is the amount they can earn before paying income tax. If you have recently started a new job and your new employer does not have your previous incomes and tax details, you may have been put onto an emergency tax code which calculates tax based on a single pay period rather than averaging across the year. Find out more about emergency tax codes and what to do if you think you've paid the wrong amount here. If you take on a second job which would put you into a different tax bracket, your tax code may also change.

What is national insurance?

National insurance (NI) is another deduction you might see on your payslips and the amount you pay depending on your earning and circumstances. This money is used to fund state benefits and the state pension here in the UK and is separate to Income Tax so seeing both deductions on your payslip is normal.

What are these other deductions?

Not every deduction on your payslip will be a tax on your earnings and you might also see things like student loan repayments, union membership or workplace pension contributions here. If you don't recognise a deduction, be sure to ask your employer what is is as you have every right to understand what is happening to your money.

How do I know if I've been paid correctly?

It's worth checking your payslip every time you get paid, especially when you have just started with a new employer, as this will help you catch and rectify any problems quickly. You can compare your payslip with your contract of employment, the hours you've worked and your agreed salary and also check;

• the number of hours on your payslip matches the hours you actually worked,

• your hourly rate or salary (national minimum wages can change so be sure to check what the rate was at the time if you're checking an older payslip)

• you recognise the deductions

• any holiday pay has been factored in correctly

• your final amount (the net pay) matches the payment that actually reached your account.

As most payslips are now sent to you digitally, do keep these emails as they can be useful should you ever need to speak to an advisor for help. If something doesn't look right, speak to you employer as soon as possible to see what's going on. You can say " I've checked my payslips and I don't think the amount matches the hours I've worked. Could you help me understand it?" If your employer doesn't sort the problem out, you can get advice from ACAS, Citizen's Advice, or a trade union if you're a member.