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Understanding Payslips

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by

Basam Diablos

on 5 September 2016

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Transcript of Understanding Payslips

Understanding Payslips
This is the payment date. In this case, it's the middle of the month, but it can be at any regular date in the month (for example on the 1st of every month, or the 23rd).

Payment can also be made weekly or fortnightly; this means getting more regular payslips.

Pay is often in 'arrears'. This means that you get paid
after
you've worked the hours.
This is the tax code. It's set by HMRC, and tells your employer how much tax you need to pay on your earnings.

If you don't know what it is, you may be set up on an emergency tax code to start with but this can unfortunately be very high.

You should always make sure you're on the right tax code.
Pension payments are voluntary, and you can choose several different types.

In the UK, everyone is now automatically enrolled in their employer's pension, which is why this money comes out of your pay. You
can
choose to opt-out of this pension, but it's recommended that you take advice before making any decisions on this.

As well as an employer's pension, you can take out a private one too if you wish.
National Insurance is something you
have
to pay; these contributions pay for the NHS and certain state benefits.
Everyone has to pay income tax - of differing proportions - to the government if they are in employment. There is no way of refusing to pay this, but this tax is used to pay for all public services like fire services, etc.
Tax years are normally written with two dates, like 2014/15, or 2015/16. This is because a tax year isn't like a normal year which starts in January and finishes in December: it's more like a school year (which starts in September).

In the UK, the tax year starts on the 6th April, and runs until the 5th April the next year.

In this case, this payslip is for the tax year which begins in April 2016, and so ends in April 2017.
Your National Insurance number is very important, and you should try to learn it off by heart.

You get this number when you turn 16, and it stays with you for every single job you ever work in the UK.

No matter what happens - even if you change your name - your NI number never changes.
'Net Pay' is the total pay that
actually
goes into your bank account after all deductions. Other deductions might be applied too, like Student Loan Payments for example.

Jobs are always advertised with the 'gross salary': this gives you the gross wage, but you should try to work out what the net pay would be before changing jobs.
'Taxable pay' tells you how much of your pay so far this year has been subject to tax.

Not all your earnings are taxable, and this is influenced by your tax code; that's why it's so important to get that right.
This is an example payslip, made especially for this exercise. Let's go through it step-by-step and see what it means.
Full transcript