Ever looked at your paycheck and wondered what it all means? If you have, you’re not alone. But understanding your paycheck is not as complex as it might seem at first.
Of course, you may be wondering why you need to learn how to read a pay stub. You don’t, but it’s good to know where your money is going. It can be useful to know how that net payment is reached, and be able to spot possible mistakes.
Once you’ve deciphered one, understanding any pay stub will be a snap. Here’s how to read one.
Payment and Personal Information
Pay stubs aren’t all identical, but the basics will be the same whether they’re issued through your payroll department or an online generator like Paystub Creator.
The first part of the pay stub will usually show personal information, as well as basic information about the check, such as dates.
In this area, you’ll find your personal information. Items such as your name, address, social security number, and marital status will be indicated here.
The pay period is the period of time that you’re being paid for. If you’re paid every two weeks, it’ll cover a two-week period. If you’re paid monthly, it’ll cover the monthly period.
The pay date is when payment for the period worked is processed. This is typically at least a week after the pay period for which you’re being paid, depending on whether you get paid weekly, bi-weekly, or monthly. This is the date the check is written.
There are two amounts on your pay stub you’ll want to pay special attention to. One of these is your gross pay or gross earnings. This is the amount you earn before any taxes or contributions are deducted.
The other one is your net pay, which we’ll get to later.
The earnings section will indicate your payment for the current pay period, and also your total earnings for the year to date. It’s important to note that these amounts are pre-tax, or gross earnings.
These figures represent your total pay before taxes and other payments are deducted. As such, they’ll be higher than the amount on your check, or the amount deposited into your bank account.
If you’re paid by the hour rather than salaried, your hours worked for the current period will also be indicated in this section.
Taxes and Other Deductions from Gross Earnings
These sections indicate the amounts deducted from your gross pay. This includes taxes paid by you and your employer, benefits, and plans you may be contributing to, as well as other deductions.
These taxes may or may not be indicated on your pay stub.
FUTA (Federal Unemployment Tax Act)
Whether they’re shown or not, there are two points about them to be aware of:
1. Your employer is paying them.
2. They do not affect your net earnings.
In addition to the standard three, most states and some cities also apply taxes to cover the cost of unemployment claims businesses may receive.
There are three federal taxes that are mandatory for all employees. They’re usually marked as follows:
Social Security Employee
Your state and local income taxes that may apply will also be in this section. These can vary depending on where you live. Some states, such as Washington, have no income tax.
If your state has other withholdings that you’re required to pay, they’ll also be indicated in this section. For example, New York has a paid family leave tax and a disability tax that employees working within the state are required to pay into.
These taxes will have already been deducted from your net payment amount. The gross earnings amount is before they have been deducted.
If you have deductions for items such as an IRA/retirement account, healthcare plan, or Flexible Spending Account (FSA), they’ll be identified in this section.
Deductions can be pre or post-tax. Pre-tax deductions will not affect your net pay, as they are deducted from your gross earnings.
Adjustments to your net pay beyond federal and state taxes and your contributions will be shown in this area.
Adjustments may include items like reimbursements for expenses, or wage garnishments.
What’s in Your Pocket?
If you’re someone who only looks at one area on your pay stub, this last section is it. This is the part that tends to matter the most to most people.
Your net pay is the amount you’ll actually see on your check or the amount deposited to your bank. Most people will look at this section first, and perhaps nowhere else.
Two amounts are shown. The payment for this period, and the total accrued payment for the year to date.
Now You Know How to Read a Pay Stub
Learning how to read a pay stub isn’t difficult. There are likely to be minor differences from one employer to another, and between different states, but the basics will be the same.
Once you’ve figured out one, you’ll be able to understand any pay stub.