Pay & Deductions

Here's a glossary of all the pay and deductions that can be entered into a payment profile or added to payslips when you run a monthly payroll.

Monthly pay

Pay should be entered into each employee’s payroll profile. These figures are used as the default values for each monthly payroll – payslips for each individual month can then be edited when running a payroll.

Basic pay

Also known as Gross Pay. Subject to tax and NI.

Allowance

Any allowance that’s subject to tax and NI. For example, London weighting or other regional allowances.

Other payments

Any other pay that's subject to tax and NI. For example, a monthly travel allowance received as salary.

Pay not subject to tax or NI

Any other pay that's not subject to Tax or NI. For example, Childcare Vouchers exempt from tax and NI that are not being taken under a salary sacrifice scheme.

If you are taking your childcare vouchers under a salary sacrifice scheme then you should deduct the amount you are sacrificing from your basic pay, as HMRC say that for the scheme to work you must forfeit the right to that pay.

The following options are available when editing payslips during each monthly payroll. Choose 'Edit Payslip' from the prepare monthly payroll screen.

Irregular employee payments

If an employee is not paid on a regular basis select 'Yes' in the 'Employee paid irregularly' option.

Overtime

Any one-off overtime payments for this month. Subject to tax and NI.

Bonus

Any one-off bonus payments for this month. Subject to tax and NI.

Commission

Any commission earned this month. Subject to tax and NI.

Monthly statutory pay

Tax and NI is automatically calculated for statutory pay – use HMRC’s statutory payments calculators to get the figures that you need to add here.

Statutory maternity pay

Read more from HMRC →

Ordinary statutory paternity pay

Read more from HMRC →

Additional statutory paternity pay

Read more from HMRC →

Statutory adoption pay

Read more from HMRC →

Monthly deductions

Add any monthly deductions that need to be made here.

Payroll giving

Include any payroll giving an employee has asked you to take from their pay. FreeAgent will automatically make the necessary adjustments to their total pay, tax, and NI.
Read more from HMRC →

Other deductions from net pay

Include items such as trade union subscriptions and employee paid health cover. Items subject to Class 1 NIC but not taxed under PAYE regulations Include items such as non-cash vouchers and payments of an employee's personal liabilities. Exclude pension contributions.

Monthly pension contributions

Add any pension figures here if you operate a pension scheme which allows staff to pay into a pension fund directly from their wages. The company might also put some money into the fund for them.

Net pay contributions

If the company pays the pension out of the employee's gross salary and the pension company doesn’t claim tax relief for the employee then it would be a net pay arrangement pension. FreeAgent assumes the employee is eligible for tax relief and the pension scheme is registered with HMRC.
Read more from HMRC.

Relief at source contributions

If the pension company is claiming the tax relief for your employee, then the employee is paying the premium out of his/her net salary. This is a “relief at source” pension..
Read more from HMRC.

Employer contribution

Include any pension contributions made by the company.

I need help with...

View all categories →

Did you find this article useful?

We're glad to hear that!

...and thanks for taking the time to feed back, it's appreciated.

We’re sorry to hear that. Would you like to...

Contact our support team

Our friendly, experienced support team are on hand to help - just email us at support@freeagent.com

Send us some feedback...

We'd love to hear your feedback about this article - please email details to support@freeagent.com