Understanding how to read a payslip, and fully understanding a payslip, is essential for temporary workers in the UK, no matter what industry you work in (industrial, retail, hospitality, facilities management, and so on), due to several reasons. Firstly, payslips provide a detailed breakdown of earnings, including the gross and net pay, as well as deductions for taxes and National Insurance contributions, pension contributions, your tax code, and any holiday pay you’ve accrued.
For the avoidance of any doubt, your gross pay is what you’d get if no deductions were taken from your wages, but, given that everyone has some deductions (tax and National Insurance, as a bare minimum), your net wage is what you actually get, in your bank account, once everything’s been considered.
All of the information contained on a payslip is crucial for temporary workers to understand, to ensure they’re being paid correctly and to verify the accuracy of their income. Additionally, temporary workers sometimes work irregular hours or shift patterns, making it even more important for them to comprehend how their pay is calculated. Knowledge of temp worker payslips also allows individuals to track their contributions to pension schemes, ensuring they’re building financial security for the future.
And, beyond that, being aware of statutory entitlements, such as holiday pay and sick pay, empowers temporary workers to push for their rights and seek resolution if any issues arise.
Overall, effectively managing finances and understanding tax responsibilities is of paramount importance for temporary workers in the UK. Given the nature of temporary employment, where income can vary based on the number of hours worked or specific roles or projects, maintaining financial stability becomes a critical aspect.
You need to know that you’re on the right tax code (should you be on 1257L or 1250L?), that you’re paying the right percentage in terms of National Insurance, that you’re paying the pension contributions that you should be (or maybe you prefer to opt out), and so on.
Ultimately, proper financial management involves creating a budget, tracking expenses, and saving for future uncertainties. And, as a temp workers you need to become tax savvy, to ensure compliance and prevent potential issues with HMRC further down the line.
By proactively managing finances and taxes, temporary workers can not only secure financial stability in the present, but also contribute to their long-term financial health and security, giving them peace of mind.
In helping to demystify payslips for temporary workers, this blog post will look to explain the component parts of them (basic wage, additional earnings, deductions, UK-specific taxes, holiday pay, and so on); breakdown different income sources; comment on income tax, National Insurance Contributions, pension contributions; give you an understanding of your tax code and the elements that make it up; and talk about the jargon, common symbols, and abbreviations on temp worker payslips in the UK.
Strap in tight, as this post is packed with important information.
The components of a temp worker’s payslip
Overview of the essential elements within a UK temp worker’s payslip
A typical temp worker’s payslip will be made up of several elements and will show a breakdown of your earnings, from the gross amount (before anything is taken away), through to deductions such as tax and NI contributions, and then your net earnings (what you get after those deductions).
Most temp workers are on PAYE (Pay As You Earn) and will get their payslips online. And if you’re wondering when I should receive my payslip, in most cases it will be weekly.
That’s certainly the case with an Indeed Flex wage slip (even if you choose to access our daily Instant Pay, you’ll still get a weekly payslip).
In fact, to break down the essential elements of UK temp worker’s payslip, we’ve given an example of one of our own that a Flexer (one of our jobseekers) would get.
So, to break things down, here are the various elements explained, which should go a long way in helping you to understand your payslip:
- National Insurance Number (also known as your NINO): This number is unique to you and ensures National Insurance contributions are registered against your name. National Insurance Contributions cover things such as your State Pension, access to the NHS, and social care for all.
- Referral Bonus: This is specific to Indeed Flex. If, as a Flexer, you refer a friend or family member to us, you (and they) receive a £40, £100, or £150 bonus, depending on who you refer.
- Other bonuses/Additional Income: Occasionally, we offer other bonuses, such as an additional £100 if you work 3 Home Delivery Driver shifts in December. These would show under ‘Referral Bonus’.
- Basic Wage: This is the amount immediately underneath ‘Referral Bonus’ and shows the total amount (gross) you’ve earned that week for the number of hours you’ve worked, at whichever rate of pay you happened to have worked for – this is what you would get, as a wage, if there were absolutely no deductions.
- Holiday Pay: This will be shown as an amount you’ve requested to take off (in this case 5 hours x 12.07% per hour holiday pay). The actual amount of holiday pay you’ve accrued would show at the bottom of your payslip.
- Overpayment Deduction: It’s highly unlikely you’ll see this on any wage slips. This deduction is only made if you’re paid for hours you didn’t actually work.
- Total Payments: This is the amount you’ll see after everything above that has been taken into account, but…
- Adjustments: If ‘Payments’ is your plus section, then ‘Adjustments’ is your minus section, where all payments required to be deducted by law are taken.
- Pension: All employers are required, by law, to provide a pension for workers. Technically, Indeed Flex would be your employer (although you’d work for our clients e.g Sainsbury’s or Atlas Hotels), so we’d provide your pension. The ‘AE’ bit stands for ‘Automatic Enrolment’, but… you have the option to opt out (you’ll be able to do this online) – it’s entirely up to you. However, doing so may leave you less financially secure in the future.
- Income Tax: This is unavoidable. Everyone has to pay income tax, whether they’re a temp worker, part-timer, freelancer, or full-timer. Income tax is taken as a percentage of your gross wage, which we’ll explain in more detail further down.
- National Insurance: This is the payment taken from you to cover state benefits, as mentioned, such as access to the NHS. This, again, is calculated as a percentage of your gross wage.
- Totals this period: This relates to your earnings during the particular payroll period the payslip covers i.e the last week. So, all of the figures shown relate to that last week’s earnings. Again, your gross pay is shown, the amount of tax you’ve paid, and other bits, like your employer’s National Insurance contributions (again, required by law).
- Totals year to date: This part relates to all of the money you’ve earned, to date, within the tax year, which runs from 6th April to the following 5th April, in the UK. So, it’ll show your gross pay, so far, for the whole year, the tax you’ve paid so far that year, and both yours and your employer’s pension contributions, among other things.
The tax you’ve paid will also be reflected on your P60, an important document which we’ll explain shortly. - Tax code/tax period/pay period: Your tax code is set by His Majesty’s Revenue and Customs (HMRC) and is made up of a series of numbers and a letter – this denotes how much tax you should pay. Again, we’ll go into this in more depth shortly. The tax period relates to the point within the tax year you happen to have reached, so, as the tax year is split into 52 weeks, a ‘7’ simply relates to week 7 of that year. Pay period is fairly obvious and relates to the period this payslip is for i.e the last week.
- Net pay: And finally – once all adjustments have been made (the deduction of National Insurance, income tax, pension, and the addition of any bonuses, overtime, or accrued holiday), your ‘net pay’ is what you’re left with – this is the actual amount that will go into your bank account.
And that’s how to read your payslip (or, more specifically, an Indeed Flex payslip) from top to bottom, and how all payslip deductions (and additions) work. We’ll now move on to a more detailed breakdown of the most common deductions.
Deductions on UK temp workers’ Payslips
The most common deductions, specific to temp workers, explained in detail
Yes, we’ve covered them above, but we’ll now look to explain the most common payslip deductions in more depth, to give you a greater understanding of your payslip as a temp worker, and the final amount you should be receiving, in terms of wages.
Income tax: Income tax is something we all have to pay. It’s unavoidable. It goes towards public services and projects, such as education, the welfare system, maintaining the roads, building new housing, and so on.
Everyone in the UK will get a tax code, based on what they earn, which is set by HMRC.
A typical example would be 1257L. This code means that you have a tax-free allowance (the amount you can earn before you have to start paying any tax) of £12,570. After earning that amount, you’ll pay 20% tax on everything up to £50,270. This code kicks in once you start earning more than £242 per week. Beyond that, you’d then pay 40% on everything from £50,270 upwards.
The letters all stand for different things. For example ‘L’ means you’re entitled to a standard, tax-free allowance, ‘BR’ stands for Basic Rate, and ‘D0’ stands for those on a higher rate – those earning in excess of £150,000 per year.
The situation is slightly different in Scotland. For everything you earn up to £12,570, you pay no tax; for everything from £12,571 to £14,732 you pay 19% tax; for everything from £14,733 to £25,688 you pay 20% tax; for everything from £25,689 to £43,662 you pay 21% tax; for everything from £43,663 to £125,140 , you pay 42%; and for everything over £125,140, you pay 47%.
Phew! You got all of that?
If you want a full breakdown of all things tax related, read our comprehensive blog post on tax for temporary workers in the UK.
National Insurance Contributions (NICs): Similarly to income tax, National Insurance is something we all have to pay. The money goes towards shared/state benefits that we’ll all need access to across our lifetimes; access to the NHS, Jobseekers Allowance, the State Pension, bereavement support, and so on.
Again, there are different categories or ‘classes’ for the different types of contributions that will be expected of you, depending on your employment status.
Employees under State Pension age (so, under 66, currently) earning more than £242 a week, will automatically have National Insurance Contributions deducted by their employer. These are considered to be ‘Class 1’ National Insurance contributions, and will be deducted at the following rates:
- For those earning between £242 – £967 per week (or £1,048 – £4,189 p/m), National Insurance Contributions will be 8% of your gross salary.
- For those earning over £967 per week (£4,189), you pay an additional 2% on anything past that amount.
There are other classes, such as ‘Class 2’, for example, which is for self-employed people earning profits of £12,570 or more a year.
To find out more about National Insurance classes and which one you should be in read this page all about it, from the government.
Pension contributions: Upon starting with any new employer, you’ll be automatically enroled into a pension scheme, if you fit the follow criteria:
1. You’re aged between 22 and State Pension age
2. You’re classed as a ‘worker’
3. You earn at least £10,000 per year.
The minimum total contribution to your pension pot is 8% of your gross salary, with 5% of that coming from you and 3% from your employer. Again, these are the minimum amounts, so they may vary, depending on what you and your employer are willing to pay in.
Your personal contributions will be deducted from each payslip.
Paying into a private pension will help to secure your financial future, alongside the State Pension, which you’ll get at retirement age (currently 66). But, if you’d rather not pay into a pension scheme or it’s a case of ‘need that money now’, then you’re well within your rights to opt out of making payments.
With Indeed Flex, it’s really easy to opt out if you want to. Firstly, wait to receive your pension pack from NEST (our chosen provider). Don’t do anything before this point. Once you’ve received the pack, if you still want to opt out, simply log in to your Paycircle Pay Portal – where all your payslips can be viewed – click on ‘Pensions’, then ‘Status’, then ‘Opt Out’… and that’s it; you’ll no longer be paying into a pension scheme.
Student loan repayments: It sounds fairly obvious but, when it comes to payslip deductions, student loan repayments will only apply to you if you were previously a student and took an available loan to cover your period of study (for tuition fees, accommodation costs, course resources etc).
Student loan repayments in the UK only begin when you earn above the repayment threshold, which varies according to when you took out that loan, and therefore which plan the Student Loans Company deems you to be on.
There are four different types of plan related to repaying student loans, so see with one applies to you:
- Plan 1 applies if you took out your student loan before 1st September 2012. You’ll only start making repayments if your income is over the repayment threshold of £24,990 a year, £2,082 a month or £480 a week. You’ll pay 9% of your gross income on anything over the amount(s) mentioned.
- Plan 2 applies if you took out your student loan between 1st September 2012 and 31st July 2023. You’ll only start making repayments if your income is over the repayment threshold of £27,295 a year, £2,274 a month or £524 a week. Again, you’ll pay 9% of your gross income on anything over the amount(s) mentioned.
- Postgraduate Loans Plan applies if you took out a student loan for a Master’s course on or after 1st August 2016, or if you took your loan out for a Doctoral course on or after 1st August 2018. You’ll only start making repayments if your income is over the repayment threshold of £21,000 a year, £1,750 a month or £403 a week. In this instance, you’ll pay 6% of your gross income on anything over the amount(s) mentioned.
- Plan 5 (no – we’ve no idea why it skips to ‘Plan 5’ and isn’t ‘Plan 4’) applies if you started an undergraduate or postgraduate course after 1st August 2023. You wouldn’t be expected to make payments on any student loan taken out until April 2026. When that time does arrive, you’ll only start making repayments if your income is over the repayment threshold of £25,000 a year, £2,083 a month or £480 a week.
At that point, you’ll pay 9% of your gross income on anything over the amount(s) mentioned.
Much like the other payslip deductions mentioned, student loans are taken from your wage through the PAYE system, so automatically go out. HMRC and the SLC communicate directly, so they’ll know when it is or isn’t the right time to take repayments.
For full information on how and when you’ll need to repay your student loan, read the government’s comprehensive information.
Taxation on UK temp workers’ payslips: what do the terms all mean?
Breaking down UK payslip jargon
When it comes to how to read a payslip, it can seem a daunting task to understand all the jargon – you may well be unfamiliar with the terminology and abbreviations used. For example, what does ‘PAYE’ mean on a payslip?
However, understanding your payslip is crucial for ensuring you’re paid correctly and making informed financial decisions. Here’s a fairly quick overview of payslip jargon for you, as a temp worker:
- Gross pay: This is the total amount you’ve earned before taxes, deductions, and other statutory withholdings are applied.
- Taxes: This section details the various taxes deducted from your pay, such as Income Tax, National Insurance contributions, and Student Loan repayments, as mentioned above.
- Deductions: These are any non-taxable deductions from your pay, such as pension contributions, union fees, or voluntary deductions.
- Net pay: The final amount you receive (the amount that actually goes into your bank account) after all deductions and taxes have been taken.
- PAYE: This simply stands for ‘Pay As You Earn’ – the system used to collect income tax and National Insurance contributions from employees’ payslips i.e. as you earn, you pay contributions along the way.
- NI: Again, this is merely an abbreviation, standing for ‘National Insurance’, a social security system that, through your payments, provides benefits like the State Pension, access to the NHS, and maternity leave.
- Student loan: As mentioned, this relates to a government loan you would’ve taken out to fund higher education studies (a university degree being the typical example). Repayments are deducted from your salary based on earnings and the specific repayment plan you’re on.
- Pension: Voluntary or mandatory contribution to a retirement savings plan.
- AE: This stands for ‘Auto-enrolment’. It means your employer has automatically enroled you into their pension scheme, as they’re required to do by law. You can, as alluded to earlier, choose to opt out, if you so wish.
- Union dues: Membership fees paid to a trade union, such an Unite or the TUC, for representation and support.
By understanding these key terms and common abbreviations, you can, as a temp worker, gain a clearer picture of your pay structure, and how much you should expect to receive on a weekly or monthly basis, and make informed decisions regarding your finances.
How to spot errors or discrepancies on your payslip
As a temp worker, it’s crucial that you have an understanding of your payslips, as this will enable you to be vigilant and thorough when reviewing them, to identify any errors or discrepancies. Here are some steps to help you spot any potential issues:
Check your personal information: Ensure that your personal details such as name, address, employee identification number, and, most importantly, your National Insurance Number are accurate – you certainly don’t want your pay going to the wrong person!
Verify hours worked: Compare the hours worked and rates of pay that are shown on the payslip with your own records, to make sure they align with your actual working hours and agreed-upon pay rate. With Indeed Flex, you can do this within the app, so can prove, straight away, the hours you worked that week/month and the hourly rate you worked for.
Gross pay and net pay: Examine your gross pay (total earnings before any deductions) and net pay (amount received after deductions). Confirm that the calculations are accurate and you’re receiving the correct final amount.
Income Tax and National Insurance Contributions (NICs): Review the deductions for Income Tax and NICs. Check that the right tax code is applied (if not, head to the HMRC website to correct it), and the calculations are accurate based on your income.
Pension contributions: If you’re enrolled in a workplace pension scheme and make voluntary contributions, ensure that the deduction matches your agreed-upon contribution rate (this will usually be a set percentage of your gross wage).
Statutory payments: If applicable, check incoming amounts for things such as statutory sick pay (SSP), maternity pay (SMP), or adoption pay are accurately calculated and applied.
Overtime and additional payments/bonuses: Check any overtime, bonuses, or additional payments, to ensure they are correctly accounted for on your payslip. For example, with Indeed Flex, you may be due a Referral Bonus, if you’ve referred a friend to us.
Allowances and deductions: Look for any other allowances or deductions, such as travel expenses or union fees, and confirm their accuracy.
Year-to-Date (YTD) figures: Pay attention to the year-to-date figures on your payslip, which summarise your total earnings and deductions for the tax year. Ensure they align with your expectations of what you should’ve earned so far and how many hours you’ve worked across the year.
And finally…
Seek clarification: If you notice any discrepancies or have questions about specific items on your payslip, don’t hesitate to contact your employer’s HR department, support team, or payroll team for clarification, and – if necessary – to rectify any issues.
How to read and understand your payslip as a temp worker: in summary
When it comes to understanding your payslip, or, more specifically, temp worker payslips, it’s essential that you know what all the various component parts that make it up mean – from your gross pay, to all of the deductions/adjustments, right through to your net pay.
This is particularly the case if you’re juggling multiple temporary jobs, giving an even greater need to keep track of things.
Ultimately you need to know that, after income tax, National Insurance, pension contributions, holiday pay, bonuses (you get the gist) are considered, you end up with the right amount going into your bank account, allowing you to plan ahead financially.
Hopefully, our breakdown of an Indeed Flex payslip goes some way to explaining all of that and showing you just what each section means.
In turn, you should now have a deeper understanding of just what your income tax, National Insurance, pension, and student loan (if applicable) liabilities are and what that money goes towards i.e. why it’s deducted from your gross pay.
You should also have a more comprehensive understanding of all the jargon used on a payslip – the seemingly ‘in terms’– and what to look out for if you’re concerned that an error has been made on yours.
Use this knowledge to plan ahead, budget, and empower your financial decisions – whether it’s something you’re looking to act upon now or a savings goal for the distant future.
Understand your payslip from top to bottom and you can feel safe in the knowledge that you’re getting what you’re owed and better work out what you need to do to achieve financial security.
