Guide to understand your payslip
SAVINGS AND INVESTMENT I March 24, 2021
Although a payslip is important in our lives, you've probably had doubts on more than one occasion when you've taken time to conduct an in-depth analysis, because you weren't sure of some of the concepts it contains. So that this doesn't happen again, we are giving you a guide to understanding your payslip: what this document consists of, what information it should contain, and its key issues.
A payslip is a document which the company must give each employee. It provides certain data on the company, the type of job you have done, the period worked, and various economic amounts. It is a receipt for payment of your salary, but it also provides evidence of the social security you have paid as an employee, and withholdings for personal income tax (IRPF). Moreover, since it has been completed and signed by the company, it is a document with a legal value in the event of any problem relating to it.
The payslip acts as evidence of social security payments made and IRPF withholdings, but also as a receipt of payment, and as such it must contain information concerning the type of work done, and the amounts received for various items. The company must provide basic data on its activity such as:
It must also contain the basic data on the employee:
These data refer to the relationship between the entrepreneur and the employee. This is considered to be the basic information that must be shown on a payslip, although more specifications may be added. Below we will describe the various sections of a payslip, and the data that must be shown in each.
The basic sections of a payslip are:
In each of the sections you will find different data, which you must be familiar with in order to interpret this document properly.
Regulations make it compulsory to shown certain data on the payslip, which identify the company and you as an employee to the State Employment Service (SEPE), Social Security and the Tax Authority. What information must be shown on the header of a payslip?
The following will appear in the company section:
The following will be shown in the employee section:
The payment period must also be shown in this section.
These data may also be accompanied by other details, such as the collective agreement applicable to the employee, the current account (of the payer and the payee), and other data.
Accruals are the earnings you receive. This is divided into two categories:
Pay received is the amounts that are paid over to you by way of remuneration for your work. There are normally several breakdowns, the sum of which is known as the gross salary. These breakdowns contain the following:
These are goods and services you receive from the company, which are not considered taxable pay. They are not liable for any IRPF deductions, and are not registered with social security.
Deductions from a payslip include payments by the entrepreneur to social security to cover any absences due to incapacity, your future pension or your unemployment benefit, which are deducted from your income. A withholding will also be deducted as an advance on income tax, which will be finalised when you submit your tax return. The main deductions you will see on your payslip are:
Contributions by the employee to social security, including:
This is an advance on what you will have to pay in your tax return, which will specify the exact sum. The percentage of this withholding is not fixed, since it will depend on what you earn (it is a progressive charge), on your personal and family circumstances (marital status, number of children, dependent persons, level of disability etc.). The minimum withholding is 2%, but this can be adjusted. The average is around 15%.
You are entitled to advance payments with respect to work already carried out before pay day. In this case, the deduction for the money requested will be set out in this section.
This value represents the appraisal of products in kind, already included in the accruals section as "Extra pay items".
Union dues may be included here.
This is the sum of accruals and deductions, and you will know when the company will deposit this in your account. This is the net salary, which you will actually receive. It is calculated by subtracting the amount to be deducted from the total accrued.
The lower section of your payslip must also have a block with the signature and/or stamp of the company, the payer, with the date of delivery of the payslip and a space for "receipt", where employees must sign and state the date on which they received their pay (if the company keeps a copy). Optionally, the number of the account where the salary is paid in may also appear here.
The usual procedure is for extraordinary payments to accrue annually. Extra payments are generated as of the day on which the previous payment is made, and are not registered annually (because you have been registered for them each month), and the IRPF tax withholding is applied to them.
All employees make a number of social security payments each month, depending on their salary. These amounts are deducted on the basis of the monthly salary pro rata. Each month the following items are withheld from your pay: common contingencies, unemployment and vocational training, as if your salary's extra payments were pro rata. When employees receive extra payments, they need only deduct income tax, because social security contributions have already been deducted.
But who decides the pro rata procedure for extra payments on the payslip? The Employment Statute stipulates that the collective agreement may establish that extraordinary gratifications will be applied pro rata over the twelve payments.
Our guide to understanding your payslip contains a new section on claiming the payslip receipt. What happens if the company does not give us a payslip? Article 29 of the Employment Statute establishes that salaries will be settled and paid promptly with documentation on the date and at the location agreed and that "salaries will be documented by an individual receipt for the payment made for the employee”. Failure to provide a payslip or failure to do so in the proper manner, therefore, is punishable. The Law on Social Infringements and Sanctions stipulates that:
If, when you have submitted a claim, you do not receive a payslip, you may request payslips in writing through the legal system.
Do you have a better idea of your payslip now? Do you know the information it contains and why you must keep it for any claims or requests? Check that the proper deductions have been made, and compare the gross annual salary to check whether it has changed.
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