Do you understand your payslip? Some of the terms and numbers on your payslip can be quite confusing but if you don’t understand it fully, you may be receiving the wrong amount of payment without knowing it.

You have the legal right to know exactly how much money you will receive from your employer and this is not something that your employer should withhold.

If you are employed full time by a company, you must receive a payslip from your employer showing your earnings before and after deductions and the amount of any deductions. This is the case unless you are an independent contractor or if you are working on a freelance basis, then the situation is slightly different because you are not on a salary, but your income is based on completing set tasks or number of hours.

Your payslip can either be in physical form (on paper) or accessible online. More and more companies are choosing to distribute their payslips online, mainly for ease but also because it is more environmentally efficient since it saves on paper and ink.

If a payslip is put online, it will still be secure – in fact, potentially more secure than a paper-slip. Usually, an employer will send the payslip as an email or allow access to it via a website log in and unique password. When provided in a paper form, they are usually sealed around the edges as extra security which needs to be unsealed carefully to access the payslip.

As a side note, you should keep your payslips (or copies of them) as they contain a lot of sensitive information. You may also need to refer to them at some point in the future or use them as proof when renting a house, applying for a mortgage or taking out a short term loan.


How to read a payslip 

By law, there is certain information that must be present on your payslip:

  • The payslip must display your gross pay. Your gross pay is the amount of money that you have earned before any deductions are accounted for. After the deductions, the amount should also be displayed – this is known as your net pay. In short, the net pay is what you will actually receive and take home with you.
  • Variable deductions – these are deductions which can change month to month such as your tax and national insurance fee. Variable deductions must be shown and shown exactly what these are for.
  • The payslip must also display the fixed deductions, although these do not require explanation more than once a year since they do not change like the variable deductions. Fixed deductions may be something like union fees or repayment of a season ticket loan.
  • The amount of “take-home” money should be clearly stated on the payslip.
  • You should also see any part payments, such as a cash payment, on your payslip.
  • The method in which the company will pay you should also be on your payslip e.g. BACS transfer

Other information which is usually on your payslip, but is not necessarily required to be provided by your employer includes:

  • Your tax code
  • Your rate of pay (this could be hourly or annually)
  • Your National Insurance Number
  • Any additional payments, including things like tips, bonuses or overtime. This should show up as part of your gross pay figure, but it may be displayed separately as well so you can see why you may have received more than usual.

Understanding what is displayed 

Personal Information 

Your name and sometimes your home address will be displayed on your payslip. You should always make sure this is up to date and correct. If it is not, you must contact your employer with an updated address. This is why your payslip is a good reference for loans and financial products since it shows your name, income and sometimes residence.

Employee Number 

For the purposes of payroll only, many companies chose to give their employees a unique personal identification number. This is particularly common in retail in which employees use their payroll number to log into the tills and clock in and out, before and after a shift.

National Insurance Number (NI) 

Every single employee will have a National Insurance Number to have the right to work in the United Kingdom. Your employer will deduct you National Insurance contributions, these will allow you to build up entitlements to state benefits such as a pension.

Tax Period 

The tax year is marked from the 6th of April to the 5th of April the following year in the UK. On your payslip, you may see a number which indicates the month according to the tax year – for example, 1 will represent April, 2 will represent May and so on.

Tax Code 

Your tax code indicates how much tax free money you are entitled to earn a year.

Basic Pay 

Your basic pay is the total amount of money earned in a month. Additional information may be present that was used to calculate the figure which is displayed, such as the number of days that you worked during that particular month.


This includes, if applicable, pay for working overtime and bonuses – anything which is an addition to your basic pay that you are paid to do.

Gross Pay 

The gross pay section will display a combination of your basic pay and additions before deductions. Here, it will show exactly what you have earned during the month.


The deductions will explain what has been taken off your overall pay. These could include NI contributions, income tax, pension contributions and student loan repayments, as well as any unpaid sick days.

Net Pay 

The net pay is an amount which shows you how much money you actually have when taking into account the deductions. It is extremely important to compare the amount of money you receive in your bank account with the amount displayed on the payslip – of course, they should match up exactly.

For a visual explanation, please watch this video courtesy of Civil Service Pension Scheme: