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. 

The law says that an itemised pay statement, setting out the various elements of pay earned and deductions made, must be given to all workers whenever wages are paid. Where your wages vary depending on the number of hours worked (for example, if you have a zero hours contract), your payslip must also show the number of hours for which you are being paid. 

How your wages are calculated should be explained in a written statement of particulars, which must be given to you on or before you start work. 

Any subsequent variation to your contract terms must 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. Before they agree terms with an employment business or agency, agency workers must be given a document called a ‘Key Information Document’, setting out what they need to know about their terms of engagement. In particular, it must include information on pay rates, all deductions, and a worked illustration of what your take-home pay will look like. 

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

You must be given an itemised pay statement, setting out the various elements of pay earned and deductions made, whenever wages are paid. 

Note: This content is provided as general background information and should not be taken as legal advice or financial advice for your particular situation. Make sure to get individual advice on your case from your union, a source on our free help page or an independent financial advisor before taking any action.

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