# Income

### Payslips

Payslips are the normal way for an employer to inform an employee of the amount the employee has earned. They also show what deductions have been taken from that amount.

Income is normally recorded as an agreed amount of pay for an agreed amount of time. This can be:

• a record of total hours worked for an hourly rate
• an agreed amount each month which is equal to one twelfth of an annual salary

Payment for extra work carried out, called overtime work, is also recorded on the payslip.

Total pay before any deductions are made is known as GROSS pay.

Deductions can be made from wages for a variety of reasons. The most common ones that all employees receive are for income tax and national insurance (NI).

Total pay after deductions are made is known as NET pay.

### Example

Question

Hitesh's payslip is below. Can you show how to calculate his gross pay for the week and his net pay for the week.

Payroll No: 002Employee No: 2278
Date: 30 June NI No. AB 12 34 56 Z
Basic pay rate: $\pounds8$ per hourTax deducted: $\pounds52.18$
Hours worked: 35NI deducted: $\pounds25.24$
Total: $= 35 \times 8 = \pounds280$
Overtime rate: $\pounds12$
Overtime worked: 5
Total: $= 5 \times 12 = \pounds60$
Gross pay: ?Net pay: ?

Gross pay = basic pay + overtime pay

$= \pounds280 + £60$

$= \pounds340$

Total deductions = tax deducted + NI deducted

$= \pounds52.18 + \pounds25.24 = \pounds77.42$

Total net pay = total gross pay – total deductions

$= \pounds340 - \pounds77.42$

$= \pounds262.58$