A payslip is a written statement of wages and deductions that all UK employers must provide to their employees. Under the Employment Rights Act 1996, every worker — whether salaried, hourly, or agency — is entitled to receive a payslip on or before each payday.
What Must a Payslip Contain?
Since April 2019, itemised payslips are required for all workers, not just employees. The following information must appear:
| Element | Description | Example |
|---|---|---|
| Gross pay | Total earnings before deductions | £3,200 |
| Variable deductions | Each deduction itemised with amount and purpose | PAYE £420, NIC £280 |
| Fixed deductions | Can be shown as aggregate with annual written statement | Pension £96 |
| Net pay | Amount actually paid to the worker | £2,404 |
| Hours worked | Required where pay varies by time worked | 160 hours |
Components of Gross Pay
Gross pay is the starting point for every payslip and includes all forms of remuneration:
- Basic salary — the contractual fixed amount
- Overtime — typically at 1.25× or 1.5× the hourly rate
- Bonuses and commissions — performance-related payments
- Statutory payments — SSP, SMP, SPP
- Benefits in kind — company car, private medical, etc. (reported on P11D)
Standard Deductions
Mandatory Deductions
| Deduction | Rate | Basis |
|---|---|---|
| PAYE income tax | 20% / 40% / 45% (Scottish rates differ) | Earnings above the tax-free pay in the employee’s tax code |
| Employee NIC | Class 1 main rate, lower rate above the Upper Earnings Limit | Earnings above the Primary Threshold |
| Student loan | 9% (6% for Postgraduate Loans) | Earnings above the threshold for the employee’s plan |
HM Treasury sets the thresholds for each tax year and payroll software applies the current figures.
Voluntary Deductions
- Workplace pension — minimum 8% of qualifying earnings in total, at least 3% from the employer (under auto-enrolment)
- Salary sacrifice — pension, cycle-to-work, childcare vouchers
- Union subscriptions
- Attachment of earnings orders (court-ordered)
Accounting for Payslips
Each payslip underpins the monthly payroll journal entry:
| Account | Debit | Credit |
|---|---|---|
| Salary expense | £3,200 | |
| Employer NIC | £380 | |
| Employer pension | £96 | |
| Net pay (bank) | £2,404 | |
| PAYE liability | £420 | |
| NIC liability (employee + employer) | £660 | |
| Pension liability | £192 |
The employer must report these figures to HMRC in real time via RTI each pay period.
Year-End Documents
Payslips feed into the key annual documents employers must issue:
| Document | Purpose | Deadline |
|---|---|---|
| P60 | Summary of total pay and deductions for the tax year | 31 May |
| P11D | Benefits in kind and expenses | 6 July |
| P45 | Issued when an employee leaves | On leaving date |
Common Payslip Errors
| Error | Impact | Fix |
|---|---|---|
| Wrong tax code | Over/underpayment of PAYE | Contact HMRC for corrected code |
| Missing overtime | Underpayment — potential NMW breach | Recalculate and pay arrears |
| Incorrect pension rate | Under-contribution — auto-enrolment breach | Correct and backdate contributions |
| Omitted student loan | Employee builds arrears with SLC | Apply correct plan type deduction |
Employees who spot errors should raise them with their employer immediately. If unresolved, they can contact ACAS or make a claim to an employment tribunal.
Record Retention
Employers must keep payroll records — including copies of payslips — for a minimum of 3 years after the end of the tax year they relate to (HMRC requirement). In practice, many employers retain records for 6 years to cover potential HMRC investigations and employment tribunal claims.
Employees should retain their payslips as evidence for self-assessment tax returns, mortgage applications, and pension queries.