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How is my pay calculated?
Pay is described in employment legislation as 'wages'. The employer has a legal duty to pay wages. Your total pay, and the way in which this total has been calculated, must be set out clearly in writing.
How your wages are calculated should be explained in a written statement of particulars, which must be given to you within two months of starting work. Any subsequent variation should also be notified to you, in writing, within one month of the change. For example, following an annual review, you should be notified of your pay rise promptly in writing.
Agency workers are also entitled to written information about their pay and how it is calculated.
Wages comprise the basic rate of pay plus most other monetary elements (e.g. overtime, bonuses, commission). Wages may be paid in the form of an annual salary, where it is usual to pay on a monthly basis or, for employees on an hourly rate, at weekly intervals.
Salaried employees are usually paid one-twelfth of their annual salary each month. Personnel paid by the hour are usually paid for the number of hours worked during the relevant week.
If you would like to get an estimate of what your annual or monthly pay works out as a per-hour rate, or vice versa, you can use our online Pay Reckoner.
Your basic salary or rate of pay may be supplemented by any overtime, bonuses or commission earned. This then becomes gross wages from which the employer is required to deduct the appropriate National Insurance contributions and income tax due.
Other deductions from wages, such as union subscriptions, may be made by agreement. The balance then becomes net wages.
Your basic pay (i.e. before any supplement such as ‘overtime’ or ‘anti-social hours’ pay) must be at least at the level of the National Minimum Wage.
An itemised pay statement, setting out the various elements of pay earned and deductions made, must be given to the employee whenever wages are paid.