Topic 3: Documents for pay and pay calculations Flashcards
What are earnings?
Earnings means the money you get for doing a job?
What are wages?
The word wages is usually used when talking about how much a person is paid per hour.
What is a salary?
The word salary is usually used when talking about a job for which the person’s pay is expressed as a yearly figure.
Name 2 things we have to pay to the government out of part of our earnings.
- tax
- National Insurance contributions.
Who collects all payments to the government?
HM Revenue and Customers (HMRC)
What is the payments to the government called?
Deductions
What is gross pay?
Gross pay is the amount that we earn before any deductions are taken away.
What is net pay?
Net pay is the amount that we receive after all deductions have been taken off. Net pay is sometimes also called “take-home pay”.
What does PAYE stand for?
“pay as you earn”.
What is PAYE?
PAYE is the way in which employees pay their tax. It is collected from their gross pay by their employer and given to the government. This is to ensure that is is paid in full and is much better than relying on the employee to work out their own tax and pay it to the government at the end of the year.
What is a payslip?
A payslip is given by the employer to the employee showing details of the pay earned and the amount deducted.
When do employees get given their payslip
Employers must give employees payslips at the time, or just before, they are paid.
What must a payslip contain?
- the gross amount of the earnings before deductions
- the reason for, and the amounts of, all deductions
- the net amount of the earnings
- an explanation of how the earnings are paid.
What does the government use National Insurance to pay for?
The government uses funds from National Insurance to pay for things such as Jobseeker’s Allowance and State Pension.
How is National Insurance worked out?
National Insurance is worked out based on your weekly pay and it depends on how much you earn and whether you are employed or self-employed.
What are National Insurance numbers made up of?
National Insurance numbers are made up of 2 letters followed by 6 numbers and 1 letter.
Who must you give your National Insurance number to?
- HMRC
- your employer
- Student Loan Company - if applying for a student loan
- the government department that is involved if you claim any benefits
- a bank if you open an individual savings account
What do most employees pay?
Most employees pay “class 1” contributions, the 2013-2014 rate of which is 12% if your weekly earnings are between £149 and £797.
How is the amount of tax you have to pay calculated?
The amount of tax is calculated as a percentage of your income and the more you earn, the more tax you will need to pay.
What do taxpayers receive?
Tax payers receive a personal allowance.