Introduction to Income Tax and NICs Earnings
2.4.2 How salary pay figures are determined
It is common for the contract of employment to provide that the employee is to be paid an annual salary. The contract may further provide that the annual salary will be paid by instalments over the course of the year, according to the employee’s payment / earnings period. For example, an employee could be contracted to work a standard 37.5-hour week for an annual salary of £27,000 paid in 12 equal monthly instalments. The employee’s monthly salary would be £2,250. A day’s pay may also need to be identified so that pay for part -months or deductions for unpaid leave can be calculated. The method for calculating a day’s pay may be stated in the employment contract; if it is not, then the annual salary would be divided by the number of calendar days in the year.
2.5
Abbreviations
BiK
–
Benefit in Kind
HMRC
–
HM Revenue & Customs
NICs
–
National Insurance contributions
PAYE
–
Pay As You Earn (income tax)
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