Understanding your payslip

Every employee has a legal right to an itemised payslip. Here is what each line means – and the three things worth checking every single month.

The lines you will see

• Gross pay – pay before any deductions, including overtime and bonuses for the period.
• Tax code – usually 1257L, meaning a £12,570 tax-free allowance. Codes ending W1, M1 or X are emergency codes; K codes mean extra income is being taxed. Full detail in the tax codes guide.
• PAYE tax – income tax deducted this period.
• National Insurance – your Class 1 employee contribution, with a category letter (A for most employees).
• Pension – your contribution under auto-enrolment, often shown with the employer contribution alongside.
• Student loan – shown by plan type if you are repaying. Check it is the right plan: the wrong plan can cost hundreds a year.
• Year to date (YTD) – cumulative gross pay, tax and NI since 6 April. These figures drive cumulative tax codes and end up on your P60.

Three checks worth doing every month

1. The tax code. A wrong code is the single most common payroll error. If you have one job, no benefits in kind and no untaxed income, expect 1257L. Anything else deserves a question.

2. The hourly rate. Divide gross pay by hours actually worked. If you are 21 or over it must not fall below £12.71 – uniform costs and some deductions can illegally drag it under. Use the minimum wage checker.

3. The pension. Confirm contributions are actually being taken and match your agreed percentage – and that the employer is paying at least 3 percent of qualifying earnings.