Income
Payslips
Payslips are the normal way for an employer to inform an employee of the amount the employee has earned. They also show what deductions have been taken from that amount.
Income is normally recorded as an agreed amount of pay for an agreed amount of time. This can be:
- a record of total hours worked for an hourly rate
- an agreed amount each month which is equal to one twelfth of an annual salary
Payment for extra work carried out, called overtime work, is also recorded on the payslip.
Total pay before any deductions are made is known as GROSS pay.
Deductions can be made from wages for a variety of reasons. The most common ones that all employees receive are for income tax and national insurance (NI).
Total pay after deductions are made is known as NET pay.
Example
Question
Hitesh's payslip is below. Can you show how to calculate his gross pay for the week and his net pay for the week.
| Payroll No: 002 | Employee No: 2278 |
| Date: 30 June | NI No. AB 12 34 56 Z |
| Basic pay rate: \(\pounds8\) per hour | Tax deducted: \(\pounds52.18\) |
| Hours worked: 35 | NI deducted: \(\pounds25.24\) |
| Total: \(= 35 \times 8 = \pounds280\) | |
| Overtime rate: \(\pounds12\) | |
| Overtime worked: 5 | |
| Total: \(= 5 \times 12 = \pounds60\) | |
| Gross pay: ? | Net pay: ? |
| Payroll No: 002 | Date: 30 June |
|---|---|
| Employee No: 2278 | NI No. AB 12 34 56 Z |
| Payroll No: 002 | |
|---|---|
| Employee No: 2278 |
| Payroll No: 002 | Basic pay rate: \(\pounds8\) per hour |
|---|---|
| Employee No: 2278 | Tax deducted: \(\pounds52.18\) |
| Payroll No: 002 | Hours worked: 35 |
|---|---|
| Employee No: 2278 | NI deducted: \(\pounds25.24\) |
| Payroll No: 002 | Total: \(= 35 \times 8 = \pounds280\) |
|---|---|
| Employee No: 2278 |
| Payroll No: 002 | Overtime rate: \(\pounds12\) |
|---|---|
| Employee No: 2278 |
| Payroll No: 002 | Overtime worked: 5 |
|---|---|
| Employee No: 2278 |
| Payroll No: 002 | Total: \(= 5 \times 12 = \pounds60\) |
|---|---|
| Employee No: 2278 |
| Payroll No: 002 | Gross pay: ? |
|---|---|
| Employee No: 2278 | Net pay: ? |
Gross pay = basic pay + overtime pay
\(= \pounds280 + £60\)
\(= \pounds340\)
Total deductions = tax deducted + NI deducted
\(= \pounds52.18 + \pounds25.24 = \pounds77.42\)
Total net pay = total gross pay – total deductions
\(= \pounds340 - \pounds77.42\)
\(= \pounds262.58\)
