This page explains more about payslips, such as what information they should include and how to create one for your employee.
An employee has the right to know the amount they will be paid, how often and by what method (e.g. every Friday, in cash, by cheque or directly to a bank) – typically these terms will be set out in the employment contract or written particulars.
They are also entitled to receive an individual, detailed written pay statement each time you pay them. This is a payslip. It must show specific items, including:
- the employee's gross pay (before any deductions are made)
- any fixed deductions – e.g. trade union subscriptions
- any variable deductions e.g. tax
- the net amount payable after the deductions have been made (‘take home pay’)
- the amount and method for any part payment of wage (for example separate figures of a cash payment and the balance credited to a bank account).
For completeness, you might include additional information on your employee’s payslip which you are not required to provide by law, such as:
- National Insurance number
- tax code
- pay rate (either annual or hourly etc.), and
- breakdown of additional payments like overtime, tips or bonuses, which must in any case be included in the gross pay figure.
Depending on the employee's circumstances you may also need to include other payments and deductions on their payslip, for example Statutory Sick Pay, Statutory Maternity Pay, or Student Loan deductions.
From April 2019, payslips will be required to state number of hours being paid where wages vary according to time worked; either as an aggregate number of hours or as separate figures for different types of work (or rates of pay).
Giving an employee a payslip is a legal requirement and you must issue it at, or before, the time you pay your employee. Please note that this is the case even if you are not required to make tax or NIC deductions under PAYE. This is because your employee may still need an official record of their earnings should they need to do things like complete a tax return, claim state benefits or seek loans or other finance.
You can find more information on payslips on the ACAS website.
Payslips can be handwritten on paper (you can make them ‘freehand’ or blank payslips can be purchased from most stationers) or can be formulated and delivered in an electronic format (e.g. on an excel spreadsheet or by email).
If you are using payroll software, in most cases this will produce a payslip for you that you can email to your employee or print off and give to them. However, if you are using HMRC’s free Basic Pay As You Earn (PAYE) Tools package, then you should know that a payslip is not created as a part of this.
Therefore we have developed a payslip tool which you can use in conjunction with HMRC’s Basic PAYE Tools package to create a payslip.
Knowing your way around your employees’ payslips will help you understand whether they have been paid correctly and that the right amounts of tax and National Insurance have been paid on their behalf, so that you can explain things to them if necessary. You should encourage your employees to keep their payslips somewhere safe in case they need them.
As such, the following breakdown may assist you to understand the various elements of a standard looking payslip:
1. Employer Name
2. Employee’s personal information
Your employee’s name and sometimes their home address will be shown.
3. The tax year
A tax year runs from 6 April in one year to 5th April in the next. The tax year starting on 6 April 2018 and finishing on 5 April 2019 will usually be shown as 2018/19 or 18/19. Please note that sometimes the tax year will show as the first year that the tax year covers. For example, 2018/19 would be 2018 (2017/18 would have been 2017). This follows the same system adopted when the Government Finance Acts are produced each year – for example Finance Act 2018 is mainly concerned with the 2018/19 tax year.
4. Employee’s payroll number
If you have more than one employee you might find it helpful to allocate payroll, or employee numbers to them to help identify them.
The number here represents the tax period for that payslip, for example if you are paid weekly in 2018/19 then week 01 is week from 6th April to 12th April. If you are paid monthly, then month 01 is April and month 12 is March. Our payroll calendar will help you identify tax periods.
Remember that we use the week or month that includes the payday. For example, if your employee is paid on the 6th April 2018 but for the week 26 March – 1 April 2018, the payday will fall in week number 1 of the 2018/19 tax year. If they are paid on the 13 April 2018 for the week 2 – 8 April 2018, this will be week number 2 and so on.
6. Tax code
Your employee’s tax code will be sent to you by HMRC (either in the post or by an internet notification if you are registered to use HMRC's PAYE for Employers online service). It is the code that tells you how much tax-free pay your employee should get before deducting tax from the rest. If the code is wrong, your employee could end up paying too much or too little tax, so you should encourage them to check their notification of tax code and talk to HMRC if there are any problems.
This is usually shown on a payslip.
This will show how much your employee has earned in wages before any deductions are made. It might also show how their pay was calculated, for example hourly rate and the number of hours worked. It could also show any extra payments they have earned on top of basic pay like bonuses, or overtime.
9. Deductions – tax and National Insurance
Your payslip must show the amount of variable deductions, like tax and National Insurance, and any contributions your employee is making to a workplace pension. For more on other deductions you might see, go to our section pay and deductions.
10. Summary of the year to date
Some payslips will have a section which shows how much your employee has been paid so far in this financial year (from 6 April to 5 April). It might also show totals for how much your employee has paid in tax, National Insurance, Student Loans and pensions.
11. Net pay – what is left
The most important figure on the payslip for most people is their take-home pay. This is the amount your employee actually receives once all the deductions have been made.
12. Payment method
The payslip may also show the method of payment, e.g. cash, bank transfer etc.