When it comes to managing your employees’ pay and benefits in the UK, there’s a whole lexicon of terms, acronyms and abbreviations that can be a bit confusing. Finesse Resources, a leading payroll provider for small to medium-sized businesses in the UK, has put together this handy guide to simplify it for you. Let’s break down some essential payroll terminology:
Payslip terms and abbreviations explained
- AE (Auto-Enrollment): This abbreviation stands for the Pensions Auto-Enrollment scheme, ensuring eligible employees are automatically enrolled in a workplace pension.
- Attachment of Earnings Order: A court order that allows creditors to collect debts directly from an employee’s wages.
- Basic Pay: This is the regular salary or hourly rate for your employee’s standard working hours.
- Benefits in Kind: Non-cash perks provided by employers, subject to taxation.
- Bonus: Extra money given to employees, often based on personal performance or the business hitting targets.
- Commission: Payment based on sales generated by your employees.
- Contributions: Payments made to government schemes like National Insurance and pensions by both employees and employers.
- Gross Pay: This is the overall amount of money your employee earns before any deductions. Think of it as the ‘raw’ earnings.
- Hourly Rate: This is how much your employee earns per hour of work.
- Income Tax: A tax on your employee’s earnings that goes to the government.
- NINO (National Insurance Number): A unique identifier used for tracking National Insurance contributions and benefits entitlement.
- Net Pay: The money your employee takes home after all deductions from their gross pay.
- NI (National Insurance): A mandatory social security contribution made by both employees and employers in the UK.
- Pension: A retirement plan that an employee pays into to ensure a steady income after they retire.
- Salary Sacrifice: An agreement between you and your employee to exchange cash pay for non-cash benefits, such as a car.
- Tax Code: An HMRC-issued code that determines how much income tax should be deducted from an employee’s pay.
Statutory Payments abbreviations explained
- SAP (Statutory Adoption Pay): Paid to eligible employees who take time off work to adopt a child.
- SHPP (Statutory Shared Parental Pay): Provides flexibility for parents caring for children in their first year.
- SMP (Statutory Maternity Pay): For eligible employees taking maternity leave.
- SPP (Statutory Paternity Pay): Paid to eligible employees supporting their partner through childbirth or adoption.
- SSP (Statutory Sick Pay): For employees unable to work due to illness or injury.
HMRC-related terms and abbreviations explained
- Audit: An examination of your payroll data and processes usually conducted by a third-party such as HMRC or a payroll specialist.
- EPS (Employer Payment Submission): A monthly report that includes required company information.
- FPS (Full Payment Submission): A report submitted to HMRC with every employee payment.
- FPS/EPS Penalties: Penalties for late or incorrect submissions.
- HMRC (Her Majesty’s Revenue and Customs): The UK’s tax collection department.
- New starter checklist: To be filled out by new employees without a P45 or those who left their last job before 6th April.
- P11D: A form for reporting taxable benefits and expenses provided to employees.
- P45: Issued when an employee leaves a job, detailing earnings and tax payments.
- P6: An HMRC update to an employee’s tax code.
- P60: An annual statement summarizing total earnings, tax, and National Insurance contributions.
- PAYE (Pay As You Earn): The system for collecting income tax and National Insurance from employees’ wages.
- RTI (Real-Time Information): HMRC’s system for real-time payroll reporting.
Need assistance with your payroll? Finesse Resources is a team of CIPP-accredired payroll specialists based in the North West of England. They can help you navigate the complex world of payroll with bespoke packages from fully managed payroll services to tailored support. Find out more about their services on the Finesse Resources website.