The payslip a summary of payroll elements.

To start off what is a payslip?

It's basically a document that gives an employee information about what they're pay relates to.

So it's going to show things such as their total wages, their contract wages for a given period and

time.

It's going to tell them about what deductions have been made.

So whether they

are mandatory deductions, or voluntary deductions.

And it's also going to tell the individual what their take home pay is.

So what we can expect within the bank.

So there is an example of a payslip onscreen.

And there's also a PDF version within your learning resources folder within the course.

So what about the legalities

of a payslip?

Well, within the UK an employer must provide an employee with a payslip that shows...

The earnings before and after any deductions.

So the best way of thinking about earnings before any deductions is to think about your contract amount.

So what your salary is within your contract.

So for example, if you are being paid £1,000 every month, your contract might state that you have

an annual salary of £12,000.

And also after deductions.

So taking off different deduction elements.

So that gives you a value as to what you should expect within the bank.

It should detail any amount of deductions.

These could change.

For example, tax and National Insurance based on thresholds, personal allowances and percentage rates

So in theory,

The more that you get paid.

Then.

Your deduction should also increase.

And the number of hours you've worked and if your pay varies dependent on the time worked.

There are different ways of being paid you could be paid a salary, which is a fixed amount.

You could be paid an hourly rate, a daily rate.

And there's other things which we'll take a look at, such as piece rate.

It could be bonuses and commissions have an effect on the amount you are paid also.

So there's a few different kinds of pay elements that could be involved within the compilation of your

payslip.

So, the payslip we saw earlier on screen, which is also within your learning resources folder.

Let's break it down.

So we've got some key information, but it's fairly basic information.

So you would have your name, that's to distinguish it is your payslip because you wouldn't want to be receiving

somebody else's payslip.

And also the period involved.

So in this case, we are looking at the month ending the 25th February 2023.

Sometimes it doesn't, actually state the date,

it might just give the period.

For example, they might have month one, two or three,... or just one, two, three... to indicate the period.

Just bear in mind that the financial year from HMRC's perspective and also from your pay as you earn and

payslip perspective starts on the 6th of April.

So if you are going to be paid on the 30th of April.

That's going to be period one also known as month one.

Payslips can come in any format.

As long as they contain the key information that you need from a legal point of view, then it is up

to the organisation.

Or more so, the software that they are using as to how the information will be relayed back to you.

So in this example, they don't actually state the period by 1, 2 or 3 on a monthly basis.

They are actually stating the month

ending date.

So some of the key information that you would expect to see on your payslip.

You'd expect to see a tax code.

So the tax code for this year would be 1257L.

In this case, it's a Week 1

Month 1 basis.

I'm not going to go into what this means at this stage, but we will be looking at this in greater detail later

on in the course.

But all you need to know for now is that your tax code, it's basically going to indicate what your

tax free allowance is going to be.

So how much money you can earn before you start paying tax.

So within the UK, the basic tax rate is 20%.

You don't pay that 20% straight away.

You're allowed so much money before you actually start paying £0.20 on every pound.

You would expect to see the national insurance number.

This should be unique to you.

It's generated...

Normally when you turn, or just prior to turning 16 years of age, or if you are becoming a citizen of the UK,

you will be allocated National Insurance Number.

And they always consist of 2 Letters,

Six numbers and then one letter at the end.

You will also have a National Insurance letter, so it's saying here National Insurance Table.

And again, I'm not going to go into too much detail about this at the moment.

It's something that we will be looking at later on in the future.

Lesson.

Just to make you aware, there are different.

National insurance rates and categories.

And those categories are broken down.

by different letters

Just so you know, most people Category A.

So you're more than likely going to see 'A' within this section of the payslip.

And also Annual Leave.

Now within the UK

the minimum

annual leave that you are allowed to receive is 28 days.

So that's 20 days paid annual leave plus your 8 days bank holiday.

It might be that you are allowed to carry forward some Annual Leave by your employer from one period into

the next.

So, for example, during the COVID lockdown, lots of people didn't take annual leave because they were

all working from home anyway.

So they were allowed to carry forward quite a bit annually into the next period.

Normally an employer might say you can carry forward a maximum of five days, but it is up to the employer's

discretion.

Just on screen here, I've given you an extreme example.

So carrying forward, 53.62 days, probably never, ever going to be that high.

And it is an extremity just to show you how it would work because in effect, this would be two

years with Annual Leave.

So lets look at the payments.

You should see a section which just details your payments.

Is it going to be a salary or wage?

Just to distinguish between the two, salaries are normally a fixed amount that's normally based on an annual

value.

So for example, on screen here, we have £30,000 a year and that breaks down a two and a half thousand

pound.

Per month.

A wage is likely to be on an hourly basis.

So, for example, you're paid £10 per hour.

In the month if you had worked.

50 hours, then you would expect to see a wage of.

£500

However, you are paid, whether that's a salary, wage, commission, bonuses...

pay in arrears

Holiday Pay, SSP, SMP.

Some of these elements which we are going to be looking at within this course, they should all be detailed

within a payment section so that you can see a breakdown as to what your total pay is made up of.

So this one, it's quite simple, but just using a salary of 30,000 thousand pounds a year, (sorry)

which comes out at two and a half thousand pounds.

And opposing that you would expect to see a deduction section.

So you're going to have your mandatory, your statutory deductions, such as tax and NI.

They have to be deducted by law.

under the Pay As You Earn system.

But you might have some voluntary deductions also.

So I've put NEST in there, which is a pension scheme.

That is, I would say, semi-voluntary at the moment, you do have to be auto enrolled into a pension scheme,

but you can also opt out and have that monies refunded back to you.

It could be other items like you see within here.

So for example, you may be part of a trade union and you may choose to pay for that membership as a

deduction from your salary.

From your pay.

It might be that

Your employer has a salary sacrifice scheme so that might help you pay towards that.

registered childcare,

... purchasing a car, some sort of electrical equipment, like a mobile phone or laptop, or they might

have a cycle to work scheme.

And they would list those within the deduction section so you could see a breakdown as to which deductions

are going to be coming off this payslip.

you have all your payments and you also have your deductions.

And just on the design of this payslip.

I've put in this red box.

Just a little note.

We'll see when we look at some of the formats that they are areas within a payslip depending on the

software and the format of the payslip as to how the employer can communicate with you through the payslip

as an employee.

Now, just recently, there has been a 1.25% uplifted in National Insurance contributions.

There's been a lot of information within the media.

HMRC have been flagging this up with employers and employees.

But it's also good, just to reiterate, if you are an employer involved in payroll, if there's any

key information that you want to reaffirm to your workers, you can actually detail that within the

payslip as a little bit of reminder.

So earlier on I was talking about annual leave.

How you could carry so many days forward.

For example, let's say with this employer example on screen that you are allowed to carry forward ten

days annually.

It might be that in March and April.

You make that note and you detailed that note within the payslip.

It's just an extra reminder, an extra prompt for your workers to make sure that they are adhering to the rules

of the organization or the rules and legislation that have been put in place by the Government and HMRC.

And the third.

Most important part.

Of the payslip is going to incorporate the payments and the deductions.

So it's going to show you what you should actually expect into the bank.

And hopefully it should be telling you what date.

Again.

The date of when payment is going to be made is likely going to be in your contract of employment.

So it's not a necessity that you have it within the payslip, but the more information that you have

within the payslip, the more understandable it is for your employee, then the easier it is for them to

understand how and when they are being paid.

So let's just look at a couple of terms here.

We have our Gross Pay, which you come across, especially when we are looking at the Wages Control

account in future lessons.

GROSS pay is any amount before deductions.

A good way of thinking about that is what is your contracted pay?

So you see a job advertised at £24,000 a year.

That's the Gross pay.

You take off your deductions.

And whatever is left is your take home pay.

And that is known as your Net Pay.

So you might have your basic salary.

You paid some tax and national insurance.

You might of paid into a pension.

And you might have also paid subscriptions into a trade union once all those deductions have come off your

Gross Pay

also known as your Basic Pay.

Then you're going to end up with your Net Pay and that's what you're going to be taking home.

And some other information that you might see on a payslip is the Pay As You Earn reference number.

Every employer has a unique pay as you earn reference number.

It's in the format of.

Three digits.

And then 4 digits, it's normally a letter followed by three numbers, the first three digits.

So example onscreen, for Total Photo is one, two, three.

That is the HMRC office number.

So it's pinpointing as to which HMRC office is responsible for this organisation.

And then within that office, it's given a unique reference number.

To pinpoint that business.

So this is something that you would expect to see on your payslip.

It's definitely something that you're going to see on your in-year and end of year reports.

So, for example, on a P45 and a P60, those numbers might not mean a lot to you at the moment, but

we will be learning about them and looking into them in later lessons.

But the key thing is at the moment, what I want you to understand is that we will be able to distinguish

who your employer was.

Or is, through this

Unique reference number.

As we just saw terminology, which can cause confusion.

When looking at payslips and looking at payroll in general.

And we've got to think of payroll from two points of view.

We've got to think about it from the employer's point of view, and we've also got to think about it

from the employee's point of view.

So we as an employee are going to be paying taxes, national insurance.

And some other deductions or costs as an individual, as a worker, as an employee.

That's what we are going to be incurring

But the employer is also going to incur some costs

also. They've got the cost of paying you, which is your gross pay.

But they are also going to have to make some national insurance contributions.

They may have to make some pension contributions also if you have opted into a payroll (pension) scheme.

So within the payslip, you might have a running total if you like, you might have a summarised view of

this month.

And you might also have a year-to-date.

So if we just look at the left hand section for this month.

You've got your taxable gross pay.

So that's the two and a half thousand pound.

As we saw at the beginning.

But the employer also has to pay national insurance.

It's at a different rate to the employee.

And it is a cost to that organization.

I'm just looking on the right hand side and I've tried to split these two colour using red for employer

and green for employee.

We can see the year-to-date.

the running total for National Insurance and Pensions for both employee and employer?

So as the months roll on, o the weeks roll on, or whatever.

Whatever payment frequency?

You're working on these values will increase.

And again, the format of the payslip can be whatever way the organisation wants it to be.

As long as the key elements are there, it can be displayed and it can be formatted in whatever

way the organization feels fit to display that information.

But saying that nowadays, it's the software, the computerized payroll software that normally dictates

how your payroll and payslip reporting looks.

So just a few examples of different ones that I've come across in the past couple of years.

Some of the key information is still there, you've got your tax code and have your NI number...NI code and NI table

letter... the period.

Now on this one, it's actually showing you the pay period instead of a period ending date.

If you remember back to the beginning of this lesson, the period ended was the 25th February 2023.

This one, it's looking at period 12 of 2021.

So what's going to be March 2021, which this payslip relates to, because the period starts on the 6th of

April...

for Month 1, the 6th May for Month 2 and 6th June for Month 3, and so on.

It might have some extra information such as an employee number and a pay group, and that would be really in

larger organizations with lots of employees and workers to distinguish who the individual is, and in what

department, section or area they are working in.

Might also include an employee address and also an employer of address.

Just a different payslip here just to show you a different tax period.

So as you can see, this one.

Tax year starts tax year 2022.

That's when it's ended.

And it's period 1. We can see from the pay date that it's a 15th April 2021.

So that does line up with it being Month 1, because it's after 6th April.

So between the 6th April and the 5th May 2021, that is all going to be period one.

And sometimes they might just state what the tax period is.

And then we would know from the period end date and the pay date as to what year it relates to.

So this would be.

2019.

Period 5, and it's 2019 because its running from year 2018 to 2019.

So take a look at some of your payslips past and present, see if there is some key information which we have

looked at today, which is actually aligning such as your National Insurance Number, your tax code.

Although your tax code will change as the years go by.

Also your national insurance lettering.

And have a look to see if any of them are displaying any periods, payment dates or period end dates.

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