Payslip – Meaning, format, 4 reasons for a payslip and example
Nobody wants to work for free. Payday is the most exciting day for an employee. As an employee, you must have come across a payslip before. It is an essential part of any employment. It helps you as an employee understand and manage your money. It is very important for employees to understand the use of payslip as it determines what they owe and what they earn.
Definition of Payslip
A payslip is a document provided to the employee by the employer outlining detailed vital information concerning your salary. According to Priyanka Tripathi, a payslip is a receipt given by your employer, which communicates critical information like your gross income, deductions, taxes, and net income. Another name for payslip is paycheck, paycheque or salary slip.
In countries like the United Kingdom, an employer must provide you with a payslip according to your right as an employee. But exceptions are peculiar to those that work with the police service, contractors, consultants, merchant seaman, a crew member or freelance. All employees are rightfully entitled to a payslip at or before payment time.
The payslip format varies from company to company or organization to organization. An employer may decide to give the payslip in a print method (paper) or electronic medium (online via email). With the modernization of so many things, most employers prefer the electronic medium.
This is because it is easily accessible and can be retrieved at any time. It saves paper as well.
Vital Information on a Payslip
There is important information that every payslip must carry. They include:
- Gross Pay – This is the full payment of the employee for that period.
- Net Pay – This is the amount of money paid after the necessary deductions have been made. These deductions could be for Staff Pension Contributions, Pay As You Earn tax or National Housing Fund Levy)
- Companies or Organization name and address
- Total Work Days, Effective workday and number of leaves
- Employees Name, Employees Code and department.
- Employees Account Name, Account Number and Bank Name
- Payslip number: This is a number that an employer gives to each employee.
- Pay rate either annually or hourly
- Allowances: Allowance according to Long man Dictionary is the amount of money that you are given regularly for a specific purpose. Such allowances could be ( house, transportation, clothing, feeding, medical, education)
- Overtime and Bonuses
- Payment Date: This is the date that your bank account will be credited.
- Payment method ( cash, bank transfer or cheque)
- Signature and Stamp of employer
Reasons why a Payslip is necessary
- A payslip is very necessary because it is proof that a person has been employed in a particular organization or company.
- It helps in record keeping. If you encounter any challenge with your pay a particular month, your payslip will be used to rectify any issue. Issues like being underpaid or overpaid.
- It assists an employee in getting short term loans or mortgage. An employee needs a payslip when he/she wants to get a loan because it shows that you are still working. It is evident that you will be able to make refunds from what you earn.
- It is also proof that you have been paying your tax.
- It can be useful in salary negotiations for a new job. Payslips from the previous work place can be leverage to negotiate a better salary package and allowances.
In addition, all employees must keep their payslip in a well-secured place to prevent any form of identity fraud. If a thief gets a copy of your payslip, he/ she will have access to your personal information such as your address, payslip number and your account details.
Examples of Payslip
There are three types of payslip namely Normal Payslip, Adjustment Payslip and Supplementary Payslip.
Normal Payslip: Normal Payslip is the payslip that contains the normal pay for the pay period.
Adjustment Payslip: This payslip is used when an employee had been overpaid or underpaid. It is used when a change is necessary on the normal payslip.
Supplementary Payslip: This payslip is used when there is an extra payment is paid to the employee after the normal payslip had been issued. It can be used when paying for overtime or bonuses.