Imagine you land a Saturday job stacking shelves at the local shop for £8 an hour. You work 5 hours, so you cheerfully expect £40 to land in your bank account. But when payday comes, the amount is a little less — and that gap is one of the most useful things you will ever learn about money.
Ways to earn
Broadly there are two ways to get paid for work:
- Employed — you work for a business (a shop, a school, a hospital). They pay you a wage or salary, sort out your tax for you, and give you a payslip. You get holiday pay and other protections.
- Self-employed — you work for yourself (a plumber, a tutor, a market trader). You keep what you earn but you must handle your own tax, and there is no boss to give you sick pay or holidays.
Hourly wage or salary?
An hourly wage pays you for each hour worked, so more hours means more pay. A salary is a fixed yearly amount split into equal monthly payments, whether the month is busy or quiet. The UK sets a legal minimum wage (called the National Living Wage for older workers) so employers cannot pay below a set amount per hour — the exact figure is reviewed every year.
Gross, deductions and net
Your gross pay is the full amount before anything is taken out. From it, an employer removes deductions — usually Income Tax and National Insurance, and sometimes a pension contribution. What is left is your net pay, the money that actually reaches you. That is why teachers say: gross minus deductions equals net.
| Line on payslip | What it means |
|---|---|
| Gross pay | Everything you earned this period |
| Income Tax | Money sent to HMRC for public services |
| National Insurance | Contribution towards pensions and benefits |
| Net pay | Your take-home — what lands in your account |
Overtime
Overtime is extra hours beyond your normal ones, sometimes paid at a higher rate such as "time and a half" (1.5× your usual hourly rate). It is a quick way to boost gross pay when you want it.