# Learn To Love Your Payslip

An episode of [A Little Bit Richer](https://invisiblenetwork.ai/podcast/1706157445), 14 Sep 2023, 11 min.

Audio: https://pscrb.fm/rss/p/traffic.omny.fm/d/clips/2e9a850c-e6b9-48c2-afec-a8f8010f70f4/61b6e292-1c73-49e1-81ce-b075010b275f/324cc351-b007-4098-800c-b07b00ecff3d/audio.mp3?utm_source=Podcast&in_playlist=aee4b1cb-b4f6-4283-99aa-b075010cd6b0

Every employee gets a payslip… but hardly anyone ever actually reads them. That’s a great shame, because they’re packed with lots of essential information that can help you get A Little Bit Richer. From understanding tax codes to deciphering deductions, this week our host Kia Commodore digs into the fine print of your payslip with Asesh Sarkar. He’s the CEO and co-founder of Salary Finance and MyBnk’s Chair of Trustees. What’s the difference between your gross and net salary? What is PAYE? And why is keeping track of all those numbers so important? Asesh explains why there’s more to your payslip than you might expect. Plus, he gives his top payday budgeting tips, helping you cover the essentials, save enough for tomorrow, and hopefully have enough left over to treat yourself too. Kia and her guests share their own personal thoughts and opinions in this podcast. These might be different from Legal & General’s take on things. They give financial guidance for a UK audience that’s relevant at the time of recording. It’s general best practice, not the kind of personalised advice you’d get from a financial adviser. You can play the podcast and find other useful content on Legal & General’s website: https://www.legalandgeneral.com/podcasts/a-little-bit-richer See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Kia: Hey, it's Kia, and welcome back to A Little Bit
[0:03] Kia: Richer. Okay, cast your mind back. We all remember starting
[0:06] Kia: that first full- time job, getting excited to get paid,
[0:09] Kia: and then come payday, wondering where the hell a third
[0:12] Kia: of our money had gone. The answers all lie in
[0:14] Kia: your payslip and I want to make that little bit
[0:17] Kia: of paper make sense. How hard can it be? Asesh
[0:19] Kia: Sarkar is going to join me to help rip apart
[0:21] Kia: those payslips. Not literally. They're mostly digital now anyway. Anyway,
[0:25] Kia: Asesh is the global CEO and co- founder of Salary
[0:28] Kia: Finance, a leading employee financial wellness platform. He's also the
[0:31] Kia: chair of trustees of MyBnk, which runs financial education programs
[0:35] Kia: for five to 25 year olds. He knows his stuff. Asesh,
[0:39] Kia: let's start with the basics. You get your payslip and
[0:41] Kia: there's a lot of deductions. What are the main ones
[0:44] Kia: and what are they for?
[0:45] Asesh Sarkar: So if we take it right from the beginning, so
[0:47] Asesh Sarkar: you get your payslip, a recent survey showed that one
[0:50] Asesh Sarkar: in four people don't actually look at their payslip, and
[0:53] Asesh Sarkar: another one in four people do look at it but
[0:55] Asesh Sarkar: don't really understand it. So one in two people aren't
[0:58] Asesh Sarkar: really getting much value from their payslip. So a payslip I
[1:02] Asesh Sarkar: think of a little bit as a book or a
[1:04] Asesh Sarkar: story. A story has a beginning, it has a middle,
[1:08] Asesh Sarkar: and it has an end. And so on every payslip
[1:10] Asesh Sarkar: you have a beginning, which is your gross pay. And
[1:13] Asesh Sarkar: what that means is that's the amount of money you
[1:16] Asesh Sarkar: earn, the top line. So if you work, if you're
[1:19] Asesh Sarkar: hourly paid, and let's say you earn 10 pounds an hour, if in the
[1:22] Asesh Sarkar: month you've done 10 hours, then your gross pay is a £
[1:24] Asesh Sarkar: 100 for that month. Or if you get a salary
[1:27] Asesh Sarkar: and let's say you earn £ 12,000, £ 1000 a month, then
[1:30] Asesh Sarkar: your gross pay is £ 1000 for that month. So that's
[1:33] Asesh Sarkar: the beginning of the story. Like you say, there's deductions
[1:36] Asesh Sarkar: and other things. The middle of the story is then
[1:38] Asesh Sarkar: these deductions, so things which come out. And so there
[1:42] Asesh Sarkar: are universal deductions, things which everyone has to pay over
[1:45] Asesh Sarkar: a certain level of income, and other deductions which are
[1:48] Asesh Sarkar: specific to your employer and any benefits you may have
[1:50] Asesh Sarkar: taken up. And then once those deductions are taken, you
[1:52] Asesh Sarkar: get to the end of the story, which is your
[1:54] Asesh Sarkar: net pay, and that is how much you take into
[1:57] Asesh Sarkar: your bank account at the end. Like with most stories,
[2:00] Asesh Sarkar: most happens in the middle, and so if I maybe
[2:03] Asesh Sarkar: pick on two of the common deductions and two of
[2:05] Asesh Sarkar: the big ones. So that's tax, one of those taxes
[2:08] Asesh Sarkar: is income tax and the other is national insurance. So
[2:12] Asesh Sarkar: income tax is typically a big chunk. Income tax is
[2:15] Asesh Sarkar: collected by the government, or by HMRC, and they use
[2:18] Asesh Sarkar: that money for public services. So whether it's funding schools,
[2:23] Asesh Sarkar: hospitals, roads, other emerging service, that's how the country is
[2:26] Asesh Sarkar: funded. And when calculating income tax, it depends what your
[2:31] Asesh Sarkar: tax code is and how much you earn. So on your
[2:33] Asesh Sarkar: payslip you'll see a tax code, some digits, and some
[2:36] Asesh Sarkar: letters usually. And what that tells you is what's called
[2:39] Asesh Sarkar: your personal allowance, which means how much you can earn
[2:43] Asesh Sarkar: without having to pay any tax. For most people, if
[2:46] Asesh Sarkar: you earn less than a £ 100,000, that is about £ 12,700,
[2:50] Asesh Sarkar: and so that's your tax- free amount. So if you
[2:52] Asesh Sarkar: earn under that, you don't have to pay any tax.
[2:54] Asesh Sarkar: If you earn above that, then you are a taxpayer
[2:58] Asesh Sarkar: and then you pay one of three rates of tax,
[3:00] Asesh Sarkar: a basic amount, a higher amount, or an additional amount.
[3:05] Asesh Sarkar: That's the first chunk. The second chunk is national insurance.
[3:08] Asesh Sarkar: And so again, this goes to the government, but this
[3:11] Asesh Sarkar: money the government uses to fund, if you're ever unemployed,
[3:15] Asesh Sarkar: if you're ill, retirement, and they use this money to
[3:19] Asesh Sarkar: fund those. As it happens, I'm going to visit my
[3:22] Asesh Sarkar: mom later, I need to take her to hospital, and
[3:23] Asesh Sarkar: so sometimes people can view deductions and taxes are negative,
[3:26] Asesh Sarkar: but equally we're fortunate to live in a country with
[3:29] Asesh Sarkar: great services, and so the money does go towards that. And
[3:33] Asesh Sarkar: national insurance is a little bit like income tax in
[3:35] Asesh Sarkar: a calculation. You have an amount of income below which
[3:38] Asesh Sarkar: you don't have to pay anything. I think that's around
[3:40] Asesh Sarkar: again about 12, 500. If you earn below that, then you don't have
[3:43] Asesh Sarkar: to pay anything. 12,500 to around 50,000, you pay 12%
[3:48] Asesh Sarkar: of what you earn. And above 50, 000, it then drops down
[3:51] Asesh Sarkar: to 2% for that incremental income. And so they're the two
[3:54] Asesh Sarkar: big universal deductions. Overall, that's the story of a payslip.
[3:58] Asesh Sarkar: You start with your gross pay, what comes in, you
[4:01] Asesh Sarkar: have your deductions that come out, then you have your
[4:02] Asesh Sarkar: net pay at the end.
[4:04] Kia: I think that was a great breakdown. I've got a payslip here,
[4:06] Kia: so we have a good example to have a look at.
[4:07] Asesh Sarkar: Good.
[4:08] Kia: So you mentioned tax, so often that's referred as PAYE,
[4:13] Kia: in your payslip.
[4:14] Asesh Sarkar: That's right. Yeah, pay as you earn. That's right.
[4:14] Kia: Exactly.
[4:15] Asesh Sarkar: Exactly.
[4:15] Kia: So that is the tax that you mentioned first, and then we've got
[4:17] Kia: national insurance, which is also on there. So I think
[4:19] Kia: it's really good, like you said, even the tax code. I
[4:22] Kia: think a lot of people don't realize that the tax
[4:24] Kia: code is important, like you said, it denotes your personal
[4:26] Kia: allowance amount, but it's also important to make sure you're on the
[4:28] Kia: right tax code. I think that often happens to a lot
[4:30] Kia: of people who move jobs. I know that happened to
[4:31] Kia: me when I went to one of my jobs, I was on
[4:34] Kia: the wrong tax code, got taxed a large amount. But
[4:37] Kia: it's always good to keep on top of that. That's
[4:38] Kia: why, if you're part of the one in two, hopefully
[4:40] Kia: from listening to this episode, you will change that. So
[4:43] Kia: you touched on the fact that there are other deductions,
[4:46] Kia: so let's go into that a little bit. What other deductions
[4:48] Kia: could you also see on your payslip?
[4:49] Asesh Sarkar: Yeah, so other deductions tend to be employer specific things
[4:53] Asesh Sarkar: which your employer offer, and then what you choose to
[4:56] Asesh Sarkar: take up from your employer. So one of those is
[4:58] Asesh Sarkar: pensions. Actually, all employers in the UK now offer a
[5:02] Asesh Sarkar: pension. And so if you choose to do that, then
[5:04] Asesh Sarkar: you'll see that on your payslip as well, and so
[5:07] Asesh Sarkar: that leaves your payslip and then you'll see that money
[5:09] Asesh Sarkar: going into a pension pot somewhere. Another example is employers
[5:13] Asesh Sarkar: quite often offer employee benefit. So something like cycle to
[5:17] Asesh Sarkar: work is quite common in the UK, and so that's
[5:20] Asesh Sarkar: where essentially your company gives you a loan to buy
[5:23] Asesh Sarkar: a bike. That amount you don't have any tax on,
[5:25] Asesh Sarkar: so you're essentially saving on that a tax amount, and then you
[5:28] Asesh Sarkar: repay that with a monthly fee until the bike is
[5:31] Asesh Sarkar: paid off. Or about 5 million employees in the UK
[5:33] Asesh Sarkar: can access what my company offers, which is called salary
[5:36] Asesh Sarkar: financing. That is if you take a loan, we can
[5:38] Asesh Sarkar: collect the repayments on payroll to allow you to get
[5:40] Asesh Sarkar: a low interest rate. Equally, we allow you to save
[5:43] Asesh Sarkar: directly from your salary as well. And there are a host of
[5:46] Asesh Sarkar: other things. If you have any student loans, that could
[5:48] Asesh Sarkar: come off it as well. But it is always really worth taking
[5:50] Asesh Sarkar: a look at that deductions line, whether it's tax, whether
[5:53] Asesh Sarkar: it's something else, just to make sure you are not overpaying, because
[5:57] Asesh Sarkar: these things happen every payslip and if you are overpaying even a
[6:00] Asesh Sarkar: little bit every payslip, then it can start to add up.
[6:02] Kia: Exactly, exactly that. So I think when it comes to talking
[6:06] Kia: about our money and having a look and seeing how much
[6:08] Kia: money we've got, I find that payday is a really good
[6:10] Kia: day to budget. That's definitely what I do anyway with
[6:13] Kia: my money. So it's a good time to put away
[6:15] Kia: money into different pots, whether it's going out, saving money,
[6:19] Kia: all those kinds of things. And bills. Do you have
[6:21] Kia: any advice for our listeners when it comes to budgeting
[6:24] Kia: and almost the best practices for that?
[6:26] Asesh Sarkar: Yeah, sure. So I think it's important to remember the
[6:29] Asesh Sarkar: world we live in is a world in which billions
[6:32] Asesh Sarkar: of pounds is spent enticing us to spend our money.
[6:35] Asesh Sarkar: And unfortunately, to live in a great world where there's
[6:37] Asesh Sarkar: pretty cool things to buy, endless very cool things to
[6:40] Asesh Sarkar: buy, and so every day you're being enticed, whether it's
[6:43] Asesh Sarkar: you are watching a Reel, watching TV, you're on your
[6:46] Asesh Sarkar: computer looking at an ad, everything you look, whether it's
[6:50] Asesh Sarkar: people talking, there is just this constant opportunity to buy
[6:54] Asesh Sarkar: very cool things. Like I say, unless you budget and
[6:58] Asesh Sarkar: unless you take the time to budget, you'll just continually
[7:01] Asesh Sarkar: spend, and then are out of control of your finances
[7:04] Asesh Sarkar: and it becomes quite challenging. I think the process of
[7:06] Asesh Sarkar: budgeting is really important, and like you say, the payday is
[7:09] Asesh Sarkar: a really good time to reflect on how the last
[7:11] Asesh Sarkar: month has gone, or whatever frequency you get paid on,
[7:13] Asesh Sarkar: and then what you want to do in the next month
[7:15] Asesh Sarkar: as well. Personally, I was born in a city, not
[7:18] Asesh Sarkar: a huge amount of wealth. My parents are first generation
[7:20] Asesh Sarkar: migrants. I've done reasonably well, and so I have more
[7:23] Asesh Sarkar: money now. So I've seen people across the income spectrum
[7:26] Asesh Sarkar: and it's definitely not the case that money equals happiness.
[7:29] Asesh Sarkar: You could be happy with any level of money. But
[7:31] Asesh Sarkar: what tends to be the case is if you are
[7:33] Asesh Sarkar: in control of your finances, you do have a level
[7:36] Asesh Sarkar: of peace and a level of happiness. And if you're
[7:38] Asesh Sarkar: not in control, no matter how much money you have,
[7:40] Asesh Sarkar: you don't have that. So always recommend, regardless of your
[7:44] Asesh Sarkar: income and your position, being in control is independent of
[7:47] Asesh Sarkar: that. And so in terms of (inaudible) , a lot
[7:49] Asesh Sarkar: of financial planners recommends, which makes a lot of sense,
[7:53] Asesh Sarkar: I follow as well, if you look at your expenses
[7:57] Asesh Sarkar: and your budget, you put it into three categories. Things
[7:59] Asesh Sarkar: you have to spend, you need to spend, and so
[8:02] Asesh Sarkar: you need a roof over your head, you need food,
[8:05] Asesh Sarkar: you need to pay your bills. There's then things you
[8:07] Asesh Sarkar: want. And so maybe you like some nice clothes, you've
[8:11] Asesh Sarkar: got a nice holiday, that's fine as well. And then
[8:14] Asesh Sarkar: there's also saving for your goals, because as you get
[8:19] Asesh Sarkar: older, you are going to want to progress in life.
[8:21] Asesh Sarkar: You are going to want to deposit on a house
[8:23] Asesh Sarkar: and other things. And the general rule of thumb is
[8:25] Asesh Sarkar: that you have 50% of your income which goes on
[8:28] Asesh Sarkar: your needs. You have 30% of your income which goes
[8:32] Asesh Sarkar: on your wants, and that's quite a decent amount on
[8:34] Asesh Sarkar: things which you enjoy. And 20% on your future goals
[8:39] Asesh Sarkar: to allow you to be progressing in life as well.
[8:41] Asesh Sarkar: And then different people have different preferences and you can
[8:45] Asesh Sarkar: allocate, but just being thoughtful about that, I think, is
[8:48] Asesh Sarkar: quite helpful. It just allows you to have some balance.
[8:52] Kia: No, I agree. I think it's good to have a
[8:54] Kia: baseline. I think sometimes if you are coming to it
[8:57] Kia: for the first time, you don't know where to start.
[8:59] Kia: I think it is good to, like you say, put
[9:00] Kia: it down 50, 30, 20. It's a good way to look at your
[9:04] Kia: money. But right now where we are, for many of
[9:07] Kia: us, especially at the moment, it's a struggle to make
[9:10] Kia: ends meet. And with the money that's left over in
[9:12] Kia: deductions, it can be a bit hard. So it's time
[9:16] Kia: for the question I'm asking everyone, you've got your pay,
[9:19] Kia: money's in your account, but what are the three things
[9:21] Kia: that you can do to try and get yourself a
[9:23] Kia: little bit richer?
[9:24] Asesh Sarkar: So number one is budgeting. Really important. Very few people
[9:28] Asesh Sarkar: do it. Life is definitely very tough at the moment.
[9:31] Asesh Sarkar: It gets even harder without a budget. So I think
[9:33] Asesh Sarkar: number one is you're looking at your expenses, categorize them,
[9:36] Asesh Sarkar: and just making sure you're more going to make sense. Number two is
[9:39] Asesh Sarkar: pay yourself first. And so rather than saving at the
[9:42] Asesh Sarkar: end of the month in case there's any money left
[9:44] Asesh Sarkar: over, save at the beginning and let the rest of
[9:47] Asesh Sarkar: your pay cover your expenses. And number three, employers offer
[9:52] Asesh Sarkar: really great benefits, discounts sometimes, whether it's a loan or
[9:56] Asesh Sarkar: savings direct from your salary, it's really worth taking maximum
[10:00] Asesh Sarkar: advantage of that because whilst we're all one person, the
[10:03] Asesh Sarkar: benefit of an employer is they have lots of people
[10:05] Asesh Sarkar: working there so they can negotiate better rates and you
[10:07] Asesh Sarkar: may as well take advantage of it. So I think definitely have a
[10:10] Asesh Sarkar: budget say first to give yourself a buffer, and then
[10:13] Asesh Sarkar: to take advantage of all of the benefits your employer has.
[10:16] Kia: That's some amazing tips and I completely agree, especially on
[10:18] Kia: the employer element, because I've definitely managed to get some
[10:22] Kia: good tickets to go to the theme parks, with a good discount.
[10:23] Asesh Sarkar: Absolutely.
[10:23] Kia: But to Asesh, thank you so much. You have given so much
[10:28] Kia: insightful knowledge to our listeners, so thank you for coming on.
[10:32] Asesh Sarkar: Thank you for having me.
[10:33] Kia: Now then, you heard Asesh and I chatting about pensions,
[10:36] Kia: student loans and all that stuff, but we're on a
[10:38] Kia: clock and I know you're busy. These episodes have to
[10:40] Kia: be short. So I'm going to dig deeper into all
[10:43] Kia: of this. Episode three is about pensions. It's easy to
[10:46] Kia: think that they're only for people in their late thirties,
[10:48] Kia: but that couldn't be further from the truth. You'll see.
[10:50] Kia: In the meantime, if you're enjoying the podcast, hit follow
[10:53] Kia: and tell your friends. It's two things that will really
[10:56] Kia: help. Okay, next week, pensions. See you later.

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