Your employees earn a salary every year that is broken down into a pay frequency such as weekly, fortnightly, 4 weekly or the most common, monthly pay. Or you might pay your employees for the hours worked each period at a set pay rate.

Whichever way you pay them their pay will be processed as gross pay and paid to them as net pay.

Gross pay is the amount an employee earns before deductions like tax, NI, pension and student loans. And this amount is the cost to the employer.

Net pay is the employees take home pay. This is the amount after tax, Ni and any other deductions are taken off and it is the amount the employer pays directly to the employee. Hence, we refer to it as take home pay.

There are some pay elements that go though the payroll but that aren’t tax or NIable and these are processed as a net pay deduction, for instance if an employee has paid for an expense and you reimburse them through the payroll then you need to pay them the exact amount and not deduct tax and NI from it, as then the employee would be out of pocket.

If you are an employer and dread processing the payroll then why not give us a ring on 01275 858001 and find out how we can help.