The most common method of communicating pay information to employees, payslips are a key component of a company’s payroll process and there are numerous changes involving payslips that are currently seen both in Sri Lanka and globally.
According to a 2021 payslip-focused survey by the CIPP or the Chartered Institute of Payroll Professionals (UK), it was reported that close to 25% of all companies surveyed had changed their payslip distribution method to online delivery post pandemic. Similar changes are seen in the Sri Lankan business landscape as well, making it important for businesses to remain abreast of the latest payslip trends in addition to the basics.
In this article, we attempt to offer a comprehensive payslip guide of value to Sri Lankan small businesses in providing professional payslips to your employees, covering must-know payslip knowledge plus other aspects that will help set your payslips apart!
What is a payslip?
A legal requirement in many countries including Sri Lanka, payslips offer official proof of payroll and salary payments made by an employer. In either electronic form or as a printed statement of salary details, it is a must for companies to provide to their employees each month.
They carry detailed information of an employee’s gross salary and the deductions made in arriving at the net salary. This is the basis for why a payslip is important and why a certain format should be followed each month, with a breakdown of the pay items that result in the final salary. Plus, in the Sri Lankan context, in providing proof of employment or salary in applying for loans, mortgages and the like, payslips are essential.
In the subsequent sections of this article, we explore several payslip considerations a small business must make. For example, what to include in a payslip, how employers distribute payslips to their employees, general payroll frequency and thereby when payslips are given, and so on.
Before we go into the general format of payslips in Sri Lanka including the different items they should ideally include, let us first briefly explore several reasons payslips are important.
Why are payslips important?
- To remain transparent and offer a breakdown of the net salary and the pay items for reference
- As official proof of past salary when joining a new organization
- Banks and other institutions expect proof of employment or salary in approving loans, etc.
- Legally required for an employer to provide payslips to employees
Below, we’ve included some interesting survey results involving Point 2 above, ‘as official proof of past salary when joining a new organization’.
A LinkedIn poll conducted by Alex Mann — Associate Director, Indirect Tax & Tax Technology at Harvey John — revealed the following on job applicants being requested for recent payslips from a new hiring company to credibly prove their salary.
When are payslips generally given?
While it is noted that a few companies provide electronic payslips on the same day that employees receive their salaries, most Sri Lankan companies tend to provide payslips a few days after the official staff pay day.
Generally, on a monthly pay cycle running from the 26th of the previous month to the 25th of the current month (when salary payments will typically be made), payslips will be distributed to staff on the 30th or 31st of the month.
The CIPP or the Chartered Institute of Payroll Professionals (UK), in their Payslip Statistics Survey Report 2021, found the following about the most popular pay day when running monthly payroll.
Although the survey is based on employers in the UK, a similar pattern of most common pay days is seen in the Sri Lankan context for companies running monthly payroll. And it is noticed that payslips are generally given 3-5 days after salary payments are made to staff.
How are payslips generally distributed to employees?
According to the CIPP payslip survey cited in the previous section, it was revealed that of digital means such as the use of online portals, online self-service, and email, around 30% of companies surveyed used email to distribute payslips.
The survey also disclosed other common methods employers use to distribute payslips to employees, including:
- Via online portal – 47% of respondents provided payslips through an online portal
- Online self-service facility – 33%
- Circulate e-payslips 31%
- Email payslips – 30%
- Physical or paper payslips sent to relevant department – 5%
While some of these payslip distribution methods are still not widely used in Sri Lanka, the use of digital methods including email is on the rise among many local businesses.
Standard Sri Lanka Payslip Format and Items Included
Whether a small business or a larger enterprise, knowledge on payslips and what they should contain may be lacking among most. Recording employee salary or pay details accurately is challenging and expertise involving the formats to be followed in processing payslips could be limited.
It’s important to know that there are different ways in which payslips are structured in Sri Lanka based on a company’s payroll, other requirements and their preferred payslip format.
Most payslips contain a standard set of information such as an employee’s basic salary, allowances, deductions and the net salary. They also include employee information such as a UID (Unique Identifier), employee name, designation and employee EPF Number, plus employee attendance details like working days, number of leaves allowed, leaves taken, overtime hours and the number of no pay leave.
Some company payslips also include pay items such as overtime, reimbursements and bonuses when applicable. It’s important to remember that these additional pay items depend on a company’s policy and it is not applicable to all companies.
Allowances generally included in payslips
Common allowances included in payslips are cost of living allowance, food allowance, travel allowance (conveyance allowance) and medical allowance, while internet allowance and mobile allowances are also widely displayed on payslips considering the regular work from home periods on rotation basis due to the ongoing COVID-19 pandemic locally. More recently, the government introduced a unique allowance type titled the budgetary relief allowance for employees earning a salary less than LKR 40,000, and such elements may also have to be included in a payslip.
Deductions generally included in payslips
Deductions generally included in payslips range from no pay days, salary advances, Employee Provident Fund (EPF), and Advanced Personal Income Tax to company loans if any.
Key Takeaways and Additional Payslip Resources
In short, payslips are essential as proof of payment and employment and also following a fixed payslip format is vital for both the employee and the employer to understand the different pay items and the salary breakdown. So we conclude, confident that your business has a better idea of what a payslip is, its importance, what it generally includes, etc., upon reading this payslip article.
Next, to offer a closer look at what a standard payslip looks like in Sri Lanka and the employee details plus pay items included in a payslip, we present a general payslip format together with a thorough list of pay items included in the page linked to below. Also, you can download several payslip templates or sample formats you can use in your business to give to your staff, completely free of charge!