Let’s face it, payslips can be confusing…
Whether it’s trying to work out exactly how much you’ll take home after tax, or just understanding all the various abbreviations that might crop up (spoiler alert: there are a lot), knowing you’re getting paid correctly can sometimes be a challenge. Especially if you’re struggling to know the difference between gross pay and net pay.
We’ve already explained payslips in a bit more detail, but here’s a quick net pay definition, and some more information about how to calculate yours.
What is net pay?
Net pay is the amount of pay left in your payslip, after deductions.
In other words, it’s the actual amount of money you take home. As a result, it’s also sometimes referred to as ‘take home pay’ (particular on some wage slips).
What is gross pay?
Gross pay refers to the total amount you are paid every month, before deductions.
This may include your regular salary or wages, as well as things like sick pay, holiday pay, overtime, and any bonuses you may receive.
Gross pay vs. net pay
OK, so now you know the difference between gross pay and net pay. But which one does your salary actually come under?
Essentially, your yearly salary is what’s known as your annual gross pay: meaning you won’t actually take home that amount – it’s just the amount you’ll receive before things like tax and National Insurance come out
To find out how much you’ll actually take home from your salary, try using our free Tax Calculator.
What deductions could come out of my paycheck?
There are a number of different things which could come out of your salary, which won’t count towards your net pay.
Examples of deductions you may incur each month include tax, National Insurance payments, Student Loan repayments, and any contributions to pension schemes you may make.
However, there are many other reasons deductions might be made – but these should all be broken down clearly as part of your payslip.
Net pay examples
So, how much are you likely to receive each month?
As a rough guide, here’s what your net pay could look like, based on a few different salary bands:
Note: These figures are for guidance only, and your own net pay may include a number of other deductibles. The Income Tax and National Insurance numbers are provided by the HMRC website, and are correct as of April 2020.
What can I do if I think my net pay is wrong?
If you think there’s a problem with your net pay, always start by checking your payslip against the amount being paid into your account.
Once you’ve done this, raise your concern directly with your employer. Your line manager or HR team should be able to point you in the right direction of who to talk to.
We’d also recommend checking that you’re on the right tax code – as this could affect your net pay.
How can I check what I should be earning?
Not sure your paycheque is adding up?
Try checking what you could be earning for similar roles in your area, using our salary checker. That way, you’ll know how your salary stacks up – and whether your net pay averages out.
If it doesn’t, it might be time to look for something new. Luckily, we can help with that…
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