Do employees understand their payslips?

In time for this year’s National Payroll Week, we surveyed UK employees on a number of different themes. One of these was payroll awareness: do employees actually understand their payslips?

If employees don’t understand how their pay and rewards work, they won’t fully engage with the total value of their employment package. This affects levels of engagement and retention, as well as the return on investment for different HR initiatives.

With that in mind, here’s a quick summary of the employee insights we collected, and what they mean for businesses.

Has your employer ever explained your payslip to you?

It’s easy to assume that all employees understand the information on their payslips. Our survey suggests that 38% don’t.

Less than half (42%) of employees have had their payslip explained to them, which could explain why many of them are left in the dark about how their remuneration works.

This is understandable – payslips can be complex for a number of reasons. Payslip formatting varies from employer to employer, it’s not always clear why certain deductions are made, and there are a number of different tax codes with different meanings.

Some employers, but not all, also choose to include the equivalent monetary value of benefits and other rewards on their payslips, alongside the base salary and any bonuses.

Unsurprisingly, less than a quarter (24%) check their payslip every month. Some employees only see their payslip as a reminder that they have been paid, rather than as an informative breakdown of their compensation package and how it is affected by different deductions and contributions.

What information should be shown on a payslip?

Most expect to see basic pay (82%) and any overtime pay (66%) represented on their payslips.

Yet only 41% expect to see the value of benefits represented, and even fewer (34%) expect to see a figure that represents the ‘total value of rewards’.

Around 40% don’t know the total value of their rewards, so businesses must take steps to promote their employment packages and encourage employees to fully utilise their benefits. One method that can be used to communicate the total value of rewards that is the inclusion of a rewards statement, either as part of or alongside the usual payslip.

This isn’t just to the advantage of the employee, but to the business. It means that the business can monitor return on its investment for different reward options, in the form of talent engagement and retention.

Who’s responsible if something goes wrong?

Payroll is complex – so knowing who is responsible when a problem occurs is not always possible.

When we asked employees who they would go to if they had an issue with their pay or rewards:

• 40% said the HR team

• 29% said the finance team

• 29% said their line manager

• 2% said they wouldn’t know who to speak to

It’s clear that there is no consensus on who ‘owns’ payroll – it’s a HR, financial and operational consideration all at once.

But should employees themselves have responsibility to make sure their pay is timely and accurate?

We found that more employees believe it’s the shared responsibility of the employee and the employer (46%) than believe it’s the sole responsibility of the employer (43%). The reason for this may again come down to the complexity of working arrangements.

Take, for example, people who work in retail. They may work unpredictable shifts and periods of overtime, and it becomes more difficult for the payroll team to have timely access to the right information for each pay reference period.

In these situations, there is a duty on the part of the employee to help share the right information with the employer so, in turn, the payroll can be processed as accurately as possible.

Supporting payroll and HR professionals

Our research shows how it important it is to make employees aware of how payroll works within your organisation. It makes it easier to resolve issues, communicate the total value of rewards, and improve the overall efficiency of the payroll process.

This is all underpinned by a reliable, high performance payroll system. Contact us today to learn more about how ResourceLink can help transform your business.