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Breaking down your payslip

When you land your first job, or start working for yourself, receiving your first pay or income can feel like an exciting and significant moment. You may receive a payslip, either electronically or on paper, which contains important information about how your pay has been calculated.

Understanding the various elements of your payslip helps provide a solid foundation for creating a budget, and will also help to establish other healthy financial habits early on. 

Gross pay and net pay

Understanding the difference between gross and net pay is important, but it can be confusing at first. Your gross pay is your full pay, before tax and any other deductions. Your net pay is sometimes referred to as your 'take home' pay, and is the total amount left after tax and any other deductions. 


The amount of tax you pay will depend on your individual circumstances, as well as on how much money you earn within a tax year. In many cases, the tax you owe will be paid, automatically, from your salary. Sometimes, however, you may be responsible for accounting for your tax yourself.

Other deductions

In addition to tax, your net pay may include one or more other deductions.

Here are some of the most common:

  • Workplace deductions, including health insurance, childcare costs, or the use of a company car. It may be worth reviewing these from time to time, to make sure that they still provide value to you.
  • Student loan repayments, which may be deducted from your gross pay and paid on your behalf automatically.
  • Retirement fund contributions, which may include payments that you have made yourself, as well as from your employer, if they have an obligation to contribute towards your retirement fund in proportion to your own contributions.

Your retirement may seem a long way off to you right now, but people who start saving for their retirement early are usually able to grow their savings significantly, and build income for their retirement more effectively than those who leave it until later in their lives. Later in this module, we look at Building a retirement fund in more detail.

Now that you understand the various elements that make up your income, you can make informed decisions about what you can afford to save, as well as your ability to repay any debts that you have and how you will reach your short, medium and long term financial goals.

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