Net Pay (SQA National 5 Applications of Mathematics): Revision Note

Exam questions break the calculation of net pay down into steps. One part might ask you to find the gross pay, though sometimes this is given in the question. One part might ask you to find the National Insurance contribution. The final part might ask you to find the net pay.

Gwen works for a construction company.

Her annual salary is £25,500.

National Insurance is calculated on a person's wage before deductions such as pension contributions.

(a) Calculate Gwen's annual National Insurance payment.

Gwen pays 8% of her annual salary into her pension.

Gwen's annual income tax is £2574.

(b) Calculate Gwen's annual net pay.

Answer:

(a) National Insurance payment

STEP 1

Calculate the amount of the Gwen's wage that falls into the second threshold

$\pounds 25,500-\pounds 12,570=\pounds 12,930$

STEP 2

Multiply this by 8%

$\begin{array}{rcl}8\%\times \pounds 12,930& =& 0.08\times \pounds 12,930\\ & =& \pounds 1034.40\end{array}$

£1034.40

(b) Net pay

STEP 1

Calculate the amount paid into Gwen's pension

$\begin{array}{rcl}8\%\times \pounds 25,500& =& 0.08\times \pounds 25,500\\ & =& \pounds 2040\end{array}$

STEP 2

Subtract all deductions from her annual salary

$\pounds 25,500-\pounds 1034.40-\pounds 2040-\pounds 2574=\pounds 19,851.60$

£19,851.60