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CATEGORY - PAYROLL SERVICES

PAYSLIPS

Most people know that an employee is legally entitled to a payslip showing what he or she has been paid, but probably not that many could name the specific items that must by law be present on a payslip. There are fewer than you might think. For example, it is not compulsory to show NI numbers or tax codes on a payslip. The list below shows all the items that it is good practice to include on a payslip. Compulsory items are shown in bold.

  • Name of employer
  • Full name of employee
  • National Insurance number
  • PAYE district/reference
  • Employee tax code
  • Payroll number
  • Tax year
  • Pay period
  • Payment date
  • Currency
  • Rates of pay
  • Units paid
  • Total gross pay
  • Analysis of gross pay
  • Tax deducted
  • NICS deducted
  • Student loan deductions
  • Other legal deductions
  • Contractual deductions
  • Voluntary deductions
  • Net pay
  • Tax year cumulative totals
  • Method of payment (but see below)

Payslips must be issued at or before the time an employee is actually paid. They should not be produced after employees have been paid although they can be given to them after that date if they were absent for some reason.

It is always good practice to show how gross pay has been made up if it is not a fixed sum each week or month. For example, if you have temporary workers on your payroll, you may want to show their hours worked and hourly rates. You also need to separately identify basic pay, overtime, commission, bonuses, holiday pay and any statutory payments such as maternity pay. It will avoid any confusion as to exactly what has been paid although of course there could still be queries on individual items. Any one-off items such as redundancy pay or proceeds from staff share schemes should ideally be shown on a separate payslip.

There may well be more to deduct on an employee payslip than tax and NI contributions. Occasionally employers may receive a Deduction from Earnings Order requiring them to deduct amounts specified by courts or authorities such as the Child Support Agency. Anything like this should be identified on the payslip, as should contractual deductions such as loan repayments, pension contributions or Sharesave schemes. There may also be voluntary deductions such as trade union dues, sports and social club subscriptions or charitable donations.

As an alternative to itemising the amount and purpose of every single deduction on your payslips, you can give your employees a standing written statement of fixed deductions at least once every 12 months. This must state the amount and purpose of each deduction together with the intervals at which the deduction is made. However, you need to reissue this every time there is a variation in the amounts deducted.

Any wage deduction that is not required by law, contractual or authorised in advance by the employee in writing is illegal. For example, you cannot dock an employee's wages for disciplinary reasons or as compensation for loss or damage caused by them without their written consent. However, you can reduce gross pay for contractual reasons such as sick leave or excess holiday. You can also recover unintentional overpayments in previous periods or deduct amounts for time not worked if the employee was on strike without their consent. In addition to this, there are special rules for retail workers allowing you to make deductions for cash shortfalls or stock deficiencies provided they do not exceed 10% of gross pay. However, you do need to inform them of this and advise how the deduction was calculated.

The method of payment need only be shown if more than one method is used. For example, an employee may receive some of his pay in cash whilst the rest is paid direct to his bank account. It is compulsory to do this so space should always be left on the payslip for such information to be shown if necessary.

It is not strictly necessary for the deductions on a payslip to exactly match the tax and NICS due under PAYE for a specific period, although you would be creating a lot of work for yourself if they didn't. Most payroll systems calculate PAYE liabilities and produce payslips at the same time, so the two generally go together. You should make sure at least one payslip is issued for all payments made during a PAYE period. These run from the 6th day of each month to the 5th day of the next for monthly payrolls. For weekly payrolls it is every 7th day from 6th April. Any payment not shown on a payslip can be treated as a wage advance or a loan with the written consent of the employee.

Finally, it may seem obvious but payslips should only be issued to employees. Contractors, freelancers and agency temps are not your employees so you should not give them payslips, although you may of course give them remittance advices confirming the amounts paid.


Acumen Accounting
2 Purley Bury Avenue, Purley Oaks, Surrey CR8 1JB
Tel: 020 8406 9425 Mobile: 07813 582890 E-mail: info@acumen-accounting.co.uk

For information of users: Although every care has been taken in compiling this material, it only provides an overview and does not take the place of an individual consultation. We strongly advise all users to consult the detailed legislation or seek professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or this firm.

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