Glossary definition

What is a payslip? UK wage slips explained

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A payslip, sometimes called a wage slip, is a document that details what an employee has been paid for a set period of work. It provides a simple breakdown of earnings and deductions, as well as the amount of leave owed or used.

As an employer in the UK, you are legally required to provide your employees with payslips, complete with specific payslip components outlined by the Department for Business, Energy and Industrial Strategy.

Though you can use a payslip template to ensure these are included, payslip software allows for greater accuracy and consistency. It also makes generating payslips faster and easier.

In the past, many businesses handed out paper payslips in sealed envelopes, but today they are usually sent electronically.

Payslips play a vital role in providing regular confirmation of your contractual obligation with each employee. In other words, they give your employees visibility into what they are being paid, and what they eventually get to take home.

Here’s what we cover in this article:

Essential components of a payslip

The payslip is the ideal document for summarising each employee’s pay status, so both you and your employees are on the same page.

Here’s what you’ll typically find included in the document:

• Gross pay: the employee’s total earnings before any deductions are taken. It includes their basic salary or wages, as well as any overtime pay, bonuses, or commissions earned during the pay period.
• Net pay: the amount of money the employee actually receives after all deductions have been subtracted from their gross pay. This is often referred to as “take-home pay”.
• Tax code: a formula used by HMRC to determine how much income tax should be deducted from an employee’s pay. It’s based on an individual’s personal allowance and other factors.
• Emergency tax code: if an employee doesn’t provide their P45 form (details of the tax payments they made in their previous job) or complete a starter checklist, you might have to use an emergency tax code. This code usually taxes the employee on all their income above a basic allowance and can result in them paying more tax than necessary initially. It’s usually temporary until the correct tax code can be applied.
• National Insurance number: the employee’s unique ID number used for social security and tax purposes.
• National Insurance contributions: these are payments made by employees and employers towards the UK’s social security system.
• Employer contributions: amounts your company contributes towards things like the employee’s health insurance or retirement plan.
• Other deductions: things like pension contributions, student loan repayments, health insurance premiums, and union fees.
• Pay rate: indicating whether the employee is paid under an annual salary or at an hourly rate of pay.
• Pay period: the dates the payslip covers.
• Payment date: the date on which payment will be transferred to the employee’s bank account.
• Employee details: primarily the employee’s name and payroll number.
• Employer details: primarily the company’s name and address.

What is a salary adjustment on a payslip?

A salary adjustment on a payslip indicates a change to an employee’s regular pay for a specific pay period. Including such adjustments on the payslip is a good way to maintain transparency and trust with your employees.

Employees need to understand exactly what they are being paid and why the amount might differ from their usual pay.

Adjustments could occur for several reasons:

• Retroactive pay: if an employee receives a pay increase that is effective from a date in the past, the adjustment will cover the underpayment from that date until the current pay period.
• Bonus or commission: a one-time bonus or commission earned by the employee will appear as an addition to their regular salary.
• Overtime pay: for eligible employees, any extra hours worked beyond their regular schedule will be paid at an overtime rate, resulting in an upward adjustment.
• Deductions: an adjustment could also be a deduction from the regular salary. This might include things like repayment of an overpayment from a previous period, or a correction made to their benefits contributions.
• Changes in salary: as employees gain promotions in your company hierarchy, their base salary will change. This may happen mid-cycle, if promotion occurs as part of an emergency replacement. In such cases, the payslip must clearly indicate a partial adjustment, reflecting the pay at the old rate for part of the period and the new rate for the remainder.
• Holiday pay: differences in pay for holiday periods might result in an adjustment, since the number of day taken is always variable.
• Sick pay: if an employee has taken unpaid sick leave, their pay will be adjusted downwards accordingly.

Common problems with payslips

While payslips are designed to provide clarity, issues can sometimes arise:

• Employee received a payslip but hasn’t been paid: if an employee received their payslip on time but the corresponding payment hasn’t reached their bank account, they need to contact your payroll or HR department immediately. There might be a processing error or a delay with the bank.
• Incorrect payslip information: your staff should be aware that they need to flag errors with you as soon as possible. This helps you nip the problem in the bud informally, without the need for employees to file formal grievances.
• Variable hours: it’s always possible that an employee’s contract allows for different hours in each pay period, or variable hours on top of their regular schedule. In those cases, the payslip must clearly show the breakdown of these hours and the corresponding pay rates. For variable hours, the payslip must detail the number of regular hours worked, any overtime hours, and the applicable pay rate for each.
• Employee didn’t receive a payslip: advise your employees that if they don’t receive a payslip by payday, they are entitled to remind you or the HR department. Remember you’re legally required to provide one. If the issue isn’t resolved, they might contact HMRC or seek outside advice.

Final thoughts

By issuing comprehensive and easily understandable payslips, you not only build trust with your employees but also significantly reduce the admin burden of payroll enquiries.

In fact, you can view the payslip as a communication tool rather than a mere transactional record. It contributes to a more transparent work environment and ultimately streamlines your operations.

Taking the time to ensure accuracy and clarity in your payslips gives peace of mind in managing this aspect of your business.

UK payslip FAQs

How are payslips delivered?

Typically, your system will provide employees with their payslips automatically, either as a physical document, via email, or through a secure online portal. Businesses of all sizes use payroll software to coordinate this.

Advise employees that if they don’t receive a payslip, or if they need a copy, they should contact the HR department or their direct manager.

When should you issue payslips?

It is a legal obligation to deliver payslips on or before payday.

This gives employees time to review their earnings and deductions before you send the money to their account. It also allows time for corrections, if necessary.

Who has the right to a payslip in the UK?

In the UK, almost all employees have a legal right to receive a payslip. This applies to full time, part time, and temporary workers, as well as casual staff and agency workers.

There are very few exceptions to this rule, most notably independent contractors or the self-employed.