Pay Stubs: What Are They & What Do They Show?

A pay stub serves as a detailed record of an employee’s earnings and deductions for a specific pay period. It provides a clear breakdown of how total earnings are calculated and what amounts are withheld before take-home pay. This document summarizes the financial transactions between an employer and an employee.

Understanding Pay Stub Components

A pay stub begins by detailing an employee’s gross pay, which represents total earnings before any deductions or taxes. This amount often includes regular wages, overtime pay, bonuses, or commissions earned during the pay period. Understanding this initial figure is important as it sets the foundation for all subsequent calculations.

Following gross pay, a pay stub lists various deductions, categorized by their tax implications. Pre-tax deductions, such as 401(k) contributions or health insurance premiums, reduce an employee’s taxable income before taxes are calculated. These amounts are subtracted from gross pay before federal, state, or local income taxes are determined, potentially lowering an individual’s overall tax liability.

Tax deductions represent mandatory withholdings required by various levels of government. Federal income tax withholding is determined by information an employee provides on their W-4 form, which indicates their filing status and any adjustments. State and local income taxes are also subtracted, with specific rates and rules varying depending on the employee’s residence and work location.

Federal employment taxes, known as Federal Insurance Contributions Act (FICA) taxes, are withheld to fund Social Security and Medicare. Social Security tax is 6.2% of an employee’s gross wages, up to an annual wage base limit that changes each year. Medicare tax is 1.45% of all gross wages, with no annual limit.

Post-tax deductions are withheld from an employee’s pay after all pre-tax and tax deductions have been applied. Examples include wage garnishments, Roth 401(k) contributions, or certain voluntary benefits like disability insurance premiums paid with after-tax dollars. These deductions do not reduce taxable income.

After all deductions are subtracted from gross pay, the remaining amount is net pay, often referred to as “take-home pay.” This is the actual amount an employee receives for the pay period, whether through direct deposit or a physical check. Pay stubs also include year-to-date (YTD) totals for gross pay and each deduction, providing a running tally of earnings and withholdings since the beginning of the calendar year.

Beyond financial figures, pay stubs include identifying information for both the employer and employee. Employer details feature the company name, address, and Employer Identification Number (EIN). Employee information includes the employee’s name, address, and often a truncated Social Security Number or an employee identification number. The pay stub also states the pay period dates and the pay date.

Importance of Pay Stubs

Pay stubs serve several practical purposes for employees beyond simply showing how much they were paid. They function as official documentation of income, often required for financial applications. Lenders frequently request pay stubs as proof of stable employment and earnings when evaluating applications for mortgages, car loans, or other credit. Landlords may also require pay stubs to verify income before approving a rental agreement.

These documents are valuable tools for tax documentation and preparation. Employees use pay stubs to reconcile information on their annual W-2 form, ensuring reported wages and withheld taxes are accurate. Discrepancies can be identified and addressed before tax filing. Maintaining a record of pay stubs supports accurate tax reporting and provides substantiation if questions arise.

For personal financial management, pay stubs are instrumental in budgeting and planning. By regularly reviewing pay stubs, individuals can track their income and understand how various deductions impact their take-home pay. This insight enables effective financial planning, helping individuals allocate funds for expenses, savings, and investments. Consistent review supports informed decisions about spending habits and financial goals.

Pay stubs provide a mechanism for employees to verify the accuracy of their compensation. Employees can cross-reference their hours worked, their agreed-upon pay rate, and the various deductions to ensure no errors. Identifying and reporting discrepancies to the payroll department ensures employees receive the correct compensation. This verification process helps protect an employee’s financial interests.

How to Obtain Your Pay Stub

Accessing pay stubs has become increasingly convenient, with employers offering several methods for employees to obtain these documents. Historically, many employees received paper pay stubs, mailed or handed out directly by their employer or human resources department. While still used by some organizations, this method is less common today.

A prevalent method for obtaining pay stubs involves online employee portals, which are secure web-based systems provided by employers or payroll service providers. These portals allow employees to log in using unique credentials to view, download, and print their pay stubs. Online access provides immediate availability and a digital record, often allowing access to current and historical pay information.

If an employee cannot access their pay stub through an online portal or does not receive a paper copy, they can request a copy directly from their employer. This usually involves contacting the human resources or payroll department. Employees may need to specify the pay period for which they need the stub, especially if requesting older records.