How to Read Your Paystub and What to Check For
Master your paystub. Gain clarity on your income, understand every deduction, and confidently check for accuracy to manage your finances.
A paystub details an employee’s earnings and deductions for a specific pay period. Understanding this document is fundamental for managing personal finances and verifying compensation accuracy. It provides a transparent breakdown of gross wages and applied deductions before net pay is issued. Familiarity with each section allows individuals to track income, monitor tax withholdings, and ensure proper contributions to benefits and other programs.
Earnings and Gross Pay
Gross pay is the total amount earned by an employee before any deductions. This figure is the starting point for all paystub calculations. It includes base wages or salary, calculated as an hourly rate multiplied by hours worked or as a fixed amount for a pay period.
Overtime pay contributes to gross earnings when an employee works beyond standard hours, calculated at one and a half times their regular hourly rate for hours exceeding 40 in a workweek. Bonuses, often tied to performance or company success, also add to gross pay. Commissions, common in sales roles, are earnings based on a percentage of sales or performance metrics.
Tips received by employees are considered taxable income and contribute to gross pay. Other earnings might include shift differentials or certain non-cash benefits treated as taxable income. All these components combine to form the total gross pay, from which all subsequent deductions are calculated.
Deductions Explained
Deductions are amounts subtracted from an employee’s gross pay, categorized as either mandatory or voluntary. Mandatory deductions primarily consist of taxes. Federal income tax is withheld based on the information provided by the employee on their Form W-4. State income tax, if applicable, and local income taxes may also be withheld.
FICA taxes are mandatory contributions for Social Security and Medicare. For 2025, employees contribute 6.2% of wages for Social Security up to an annual wage base limit, and 1.45% for Medicare on all covered earnings. An additional Medicare tax of 0.9% may apply to earnings above certain thresholds.
Voluntary deductions are chosen by the employee. Pre-tax deductions, such as health insurance premiums, 401(k) or 403(b) contributions, and Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs), are taken before taxes, reducing taxable income. Post-tax deductions, including certain life or disability insurance premiums, employer loan repayments, or union dues, are taken after taxes. Wage garnishments for child support or tax levies, and payroll-deducted charitable contributions, may also appear.
Net Pay and Cumulative Information
Net pay is the amount an employee receives after all deductions are subtracted from gross pay. Often referred to as “take-home pay,” it represents the actual funds deposited into a bank account or issued as a check. It is calculated as gross pay minus the total of all mandatory and voluntary deductions.
Paystubs also display Year-to-Date (YTD) figures, showing cumulative amounts for earnings, taxes, and deductions from the beginning of the calendar year. YTD totals provide a comprehensive overview of financial activity throughout the year. These figures are important for financial tracking, budgeting, and tax planning, as they reflect ongoing contributions and withholdings reported on annual tax documents like the W-2 form.
Checking Your Paystub for Accuracy
Regularly reviewing your paystub helps ensure the accuracy of your compensation and deductions. Verify basic personal information, including your name, address, Social Security number, and pay period dates. Cross-reference your hours worked or salary amount against your personal records.
Examine all deductions to confirm that the amounts for benefits, retirement contributions, and tax withholdings align with your elections and W-4 form. Check the year-to-date totals to ensure they increment correctly with each pay period. If any discrepancies or errors are identified, promptly contact your employer’s payroll or human resources department.