Payroll data is becoming an essential tool in modern lending. But if you're not from the payroll world, the jargon can be confusing. Here's a simple guide to 10 key payroll terms and why they matter when you're assessing affordability and risk.
PAYE (Pay As You Earn)
The UK system where employers deduct income tax and National Insurance directly from salaries.
Why it matters: PAYE records provide verified proof of income and deductions.
RTI (Real Time Information)
The system employers use to report PAYE data to HMRC each time they pay employees.
Why it matters: RTI submissions give a reliable, real-time view of someone's employment status.
FPS (Full Payment Submission)
The main RTI file employers send to HMRC, detailing each employee's pay, tax, and deductions.
Why it matters: FPS is a source-level snapshot of income, much harder to fake than a payslip.
P60
Annual statement of pay and tax issued to employees.
Why it matters: Confirms year-end income, often used in mortgage applications.
P45
Form issued when an employee leaves a job, showing pay and tax to date.
Why it matters: Verifies employment status and income continuity.
Pension Contributions
Payments deducted from salary into a pension scheme.
Why it matters: Reduces net income, but also indicates stable employment and benefits.
NI (National Insurance) Contributions
Deductions made alongside PAYE for state benefits.
Why it matters: Confirms ongoing employment and contributions history.
Umbrella Company
A company that employs contractors and freelancers, handling their payroll.
Why it matters: Important for assessing contractors' income consistency.
Statutory Pay (Sick, Maternity, Paternity)
Legally required payments during periods of leave.
Why it matters: Temporary income changes can impact affordability checks.
Pay Frequency (Weekly, Monthly, etc.)
How often an employee is paid.
Why it matters: Impacts affordability calculations, especially for variable-income workers.
Why This Matters
Understanding payroll terms isn't just nice-to-know. It ensures you're looking at the right data, in the right context, when making credit decisions.
With Teal, you don't need to chase documents or decode jargon. We deliver verified payroll data, straight from the source, through one simple API.
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