How to Understand Pay Slips (and Make Sure You’re Getting Paid What You Deserve)

You earned it.

This post is written in conjunction with the Australian Taxation Office.

Have you ever received a pay slip and been surprised to see that what lands in your bank account doesn't quite match your salary or hourly rate? 

We’re, uh, sorry to have to be the ones to break it to you, but it's not a mistake. 

The short explanation is that we all have to pay tax to help Australia run smoothly. We all use health care, parks and schools, so it makes sense that we all contribute, right? Right! That means we all part with some moolah in each pay slip.

If you’re not familiar with the term pay slip, it’s a piece of paper (although, sometimes they’re digital) that outlines the pay and entitlements you receive from your job. Your employer has to give it to you within one working day of payday, even if you’re on leave, and you should always check them to make sure you’ve been paid correctly.

But that’s far from all a pay slip covers. Let’s inspect a generic example from the Fair Work Ombudsman to break each section down for you. It may not be exactly like the specific pay slip you receive, but it’ll get the job done!

Download the Fair Work Ombudsman's pay slip template!

EMPLOYER’S NAME / ABN:

Pretty self-explanatory, but this is the name of your employer. ABN stands for Australian Business Number, which is used to identify a registered business in Australia. This lets you know who’s paying you!

EMPLOYEE’S NAME / STATUS:

Is your name spelled correctly and has your employer correctly stated if you’re full-time, part-time, casual or other? Better check!

DATE OF PAYMENT / PAY PERIOD:

Depending on your employment status and your employer, you may get paid weekly, fortnightly, monthly or on an entirely different schedule. Just make sure the period on your pay slip aligns with your expectations (and be sure to check with the Fair Work Ombudsman that you’re not being made to wait too long for your pay to come through).

NAME OF AWARD / AGREEMENT & CLASSIFICATION UNDER THE AWARD / AGREEMENT:

If Australia’s minimum wage is the minimum amount a person can be paid, then 'awards' specify the minimum conditions for specific kinds of roles. Your award may be less than or greater than the regular minimum wage (it’s usually only less if you’re under a certain age, or in a traineeship or apprenticeship). Meanwhile, 'Agreements' are the minimum conditions established between an employee and their employer, usually when there isn’t a suitable award (although, these agreements can’t pay less than a corresponding 'award' if there is one). Make sure you know your agreement or the correct award (if there is one for your role) and check that you’re being paid accordingly!

HOURLY RATE / ANNUAL SALARY:

Full-timers and part-timers are likely to earn an annual salary, with part-timers only getting paid on a pro rata basis (for example, someone with a $50,000 annual salary working three days a week is actually earning $30,000 pro rata). Casual employees are more likely to be on an hourly rate. Sometimes their hourly rates will be higher than the equivalent hourly rates of permanent employees, but that’s only because casual staff don’t earn sick or annual leave, or receive other benefits. Their hours of employment can also be unpredictable, and are not guaranteed. That’s the trade off! Make sure you know how much you should be getting paid based on your contract.

BANK DETAILS:

This is where the money goes! Make sure you check your bank account to confirm the right amount of money has come in after each pay and if you don’t see any come through or see the wrong amount, make sure your bank details are correct on your pay slip, and then follow-up with your workplace’s payroll department.

LEAVE:

Part-time and full-time employees earn a certain amount of leave every pay cycle. This annual leave can then be used for holidays or days off, which you enjoy without losing any pay (unlike casual staff who don’t get paid if they need to cancel a shift or request time off). However, all employees (including casual staff) are entitled to bereavement and compassionate leave. Other kinds of leave include sick leave, carer’s leave, family and domestic violence leave, community service leave, maternity and parental leave, and long service leave (read about them all here). How much leave you have available (and whether or not you are entitled to it) depends on your employment status and how long you’ve been with your employer. But that’s not the only reason to keep on-top of your entitlements. When you eventually move on from your workplace, your employer has to pay out certain types of leave you have accrued, like annual leave (again, depending on your status and tenure). That’s money in your pocket, so make sure you monitor your leave balance!

ENTITLEMENTS:

This is the section of your pay slip that documents how many days or hours you worked during the pay cycle and how much time was taken off (if applicable). Entitlements can also include loadings, penalty rates and overtime, which can increase your regular pay. (Did you ears just prick up? Better read about penalty rates and allowances here.) If there are any mistakes, make sure you alert payroll ASAP. At the bottom of this section, you’ll see a GROSS PAYMENT amount, which should directly correspond with your hourly rate or salary. Unfortunately, this isn’t the figure that winds up in your bank account. The next two sections explain why.

DEDUCTIONS:

Welp, this is where tax comes in. See, income tax is one source of the government’s funding. It contributes to paying for government services, like funding schools and granting youth allowances. Tax even goes towards fixing footpaths and providing people with health coverage (so thanks for chipping in!). Each payday, your employer withholds a certain amount of your money and sends it directly to the Australian Taxation Office (ATO). That amount is noted on your pay slip. You’ll get a chance to ask for some of it back when you lodge your annual tax return, as you may have some deductions to claim (money you spent over the course of the year to do your job) and the government will refund it accordingly (provided it’s all above board). However, if your employer wasn’t withholding enough of your wage, the ATO may find that you actually owe them money. So, as weird as it may sound, you’ll want to ensure your employer is taking out as much tax as is required every pay. Otherwise, you could get stung come tax time! Read more about it here.

STUDY AND TRAINING SUPPORT LOAN REPAYMENTS:

If you have a study or training loan you need to let your employer know, via a new TFN Declaration or Withholding declaration. Your employer will then withhold an additional tax from your salary or wages to cover the amount of a compulsory repayment that may be raised on your notice of assessment if you exceed the minimum repayment threshold. Read more about it here.

EMPLOYER SUPERANNUATION CONTRIBUTION:

Australia has this nifty thing called superannuation, or super. At the heart of it, it's like a long-term savings plan. If you're entitled to super, your employer is required to contribute the equivalent of 9.5% of your gross income (which is income before tax is taken out) to a super fund of your choice. The ATO has a tool that can help you check if you're entitled to super. Are you?

Super is managed and invested on your behalf by your super fund, so that when you retire or turn a certain age (but not a day before!), you can withdraw it to live on and make a positive difference to your lifestyle when you no longer need to work. You can put extra money into your super (called voluntary super contributions) to make sure you have enough to enjoy old age in style! Keep an eye on this section of your pay slip to ensure the right amount of super is being paid into the super fund you have chosen. Talk to your employer if you have any concerns about this. You can read more about super here.

Our mates at the ATO host an annual competition called "Tax, Super + You", in which students from Years 7 – 12 can win cash money prizes by flexing their creative skills. Taking part in this competition will not only give you an insight into the value of tax and super, but you also have the chance to win a share of over $6,000 in prizes! Entries close 23 August 2019. Find out more!

Header Image: 20th Century Fox