How to read a payslip, line by line

A payslip, called a pay stub in the US, shows how your pay was worked out for one pay period: what you earned before anything was taken off (gross pay), each deduction, and what reached your bank account (net pay). Reading it takes two minutes and is the easiest way to catch a wrong tax code, missing overtime or a deduction you did not agree to. This guide walks through each section. The layout varies by employer and country, but the structure is almost always the same, and it is the structure I used for the payslip generator.

The header details

The top of a payslip identifies the employer, you, your employee or payroll number, the pay period and the pay date. In the UK you will usually also see your National Insurance number and tax code. A tax code tells your employer how much tax-free pay to allow: the common code 1257L corresponds to the standard £12,570 personal allowance, and letters or a different number mean adjustments, for example for benefits or untaxed income. An emergency code, often marked W1, M1 or X, usually means your employer lacks your details and you may be overpaying. In the US, withholding is based on the Form W-4 you gave your employer.

Earnings and gross pay

The earnings section lists each type of pay: basic salary or hours multiplied by your rate, overtime, shift premiums, bonuses, commission, holiday pay, sick pay and any back pay. Lines based on time should show hours and a rate; in the UK, employers must show hours on payslips where pay varies by time worked. Gross pay is the total of these lines before deductions. If you are paid hourly, compare the hours with your own record; the timesheet calculator totals them, and How overtime pay works: time and a half, double time and the rules explains how overtime should be calculated.

Deductions

Deductions fall into two groups. Statutory deductions are required by law:

• Income tax withheld under the tax code or withholding rules.
• Social security contributions: National Insurance in the UK; Social Security (6.2%, up to an annual wage cap) and Medicare (1.45%) in the US, known together as FICA.
• Student loan repayments where they apply, and in the US, state and sometimes local income tax.

Voluntary or contractual deductions include pension or 401(k) contributions, health insurance, union dues, salary sacrifice schemes and repayments of loans or advances from the employer. Some are taken before tax (many pension and retirement contributions), which lowers the pay that tax is calculated on, so the order matters. Gross vs net salary: what comes off your pay, and how to compare offers explains the gap between the two figures in more depth.

Net pay and year-to-date

Net pay is gross pay minus all deductions, the amount that should match the payment into your bank account. Many payslips also show year-to-date totals: gross pay, tax and contributions since the start of the tax year (6 April in the UK, 1 January in the US). Year-to-date figures are useful because UK income tax is calculated cumulatively, so a refund or catch-up after a code change shows up there, and because they let you check your annual tax position before the end of the year.

Checking it is right

• Check the hours, rate and any overtime against your own records.
• Check the tax code or withholding status; an emergency code that persists is worth querying.
• Estimate the deductions independently with the paycheck calculator or, in the UK, the UK income tax calculator. Small differences are normal because payroll works period by period; large ones deserve a question.
• Look for unfamiliar deductions and ask what they are for.
• Keep payslips: they are proof of income for mortgages, rentals and tax disputes.

If something looks wrong, ask payroll first; mistakes are usually corrected in the next pay run.

Making a payslip

Small employers, households paying a nanny or carer, and contractors documenting their own pay sometimes need to produce a payslip themselves. The payslip generator lays out the earnings lines (salary, hours × rate, overtime, bonus), deductions, gross, net and optional year-to-date figures, and prints or saves a PDF. With $3,200 of basic pay, 6 hours of overtime at $30 and deductions of $512, $245 and $160, it shows gross pay of $3,380, deductions of $917 and net pay of $2,463. It deliberately does not calculate tax or contributions, because those depend on country, tax code and thresholds that change every year; enter the figures your payroll software, accountant or tax authority gives you. Everything is saved only in your browser.