What Important Information Is on a Paycheck Stub?
Decipher your pay stub to understand the journey of your compensation. Gain clarity on your income and financial withholdings.
A paycheck stub serves as a comprehensive record detailing an employee’s earnings and deductions for a specific pay period. It provides transparency, allowing individuals to verify their compensation. It also functions as a personal financial record, often required as proof of income for applications like loans or housing.
Identifying Employee and Employer Details
A paycheck stub lists identifying information for both the employee and employer. This includes the employee’s full name, address, and any employee identification number. The employer’s name, address, and Employer Identification Number (EIN) are also present. The EIN is a nine-digit number assigned by the Internal Revenue Service (IRS).
The pay period start and end dates indicate the specific timeframe for which earnings are calculated. The pay date, when payment was issued, is also present. These details are important for accurate record-keeping, helping employees track work periods and confirm timely payments. They are also useful for verifying income and employment history.
Understanding Gross Pay Components
Gross pay represents an employee’s total earnings before any deductions are subtracted. This amount forms the basis for calculating taxes and other withholdings.
For hourly workers, gross pay is their hourly rate multiplied by regular hours worked. If an employee works beyond standard hours, they may earn overtime pay, usually calculated at one and a half times their regular hourly rate. Salaried employees receive a fixed amount for the pay period. Gross pay can also include commissions, bonuses, reported tips, shift differentials, or holiday pay.
Navigating Deductions
Deductions are amounts subtracted from gross pay, leading to net pay. These deductions fall into two main categories: mandatory and voluntary. Mandatory deductions include taxes employers are legally required to withhold. Federal income tax is withheld based on information provided on Form W-4. State and local income taxes may also be withheld.
Federal Insurance Contributions Act (FICA) taxes are another mandatory deduction, funding Social Security and Medicare. For 2025, the Social Security tax rate is 6.2% on earnings up to an annual wage base limit of $176,100. The Medicare tax rate is 1.45% on all taxable wages, with an additional 0.9% for wages exceeding $200,000.
Voluntary deductions are those elected by the employee. Pre-tax voluntary deductions reduce an employee’s taxable income. These include health insurance premiums, contributions to retirement plans (e.g., 401(k)s or 403(b)s), Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs), and commuter benefits.
Post-tax voluntary deductions are taken after taxes have been calculated and withheld. These include contributions to Roth 401(k) accounts, which are funded with after-tax dollars but offer tax-free withdrawals in retirement. Wage garnishments, which are court-ordered withholdings for debts like child support, student loans, or tax levies, are also post-tax deductions. Other post-tax deductions might include union dues or charitable contributions.
Reviewing Net Pay and Cumulative Information
Net pay, often referred to as take-home pay, is the amount an employee actually receives after all deductions have been subtracted from their gross pay. This figure represents the actual funds available for an employee’s personal use and budgeting. Understanding the difference between gross and net pay is important for financial planning.
A paycheck stub also provides crucial year-to-date (YTD) information. This cumulative data shows the total gross pay earned, along with the total amounts withheld for each type of tax and deduction, from the beginning of the calendar year through the current pay period. YTD figures are valuable for tracking overall earnings and deductions throughout the year, assisting with personal financial management and tax planning. They also help in verifying the accuracy of annual tax statements, such as a Form W-2. Finally, the pay stub will indicate the method by which the net pay was disbursed, most commonly direct deposit to a bank account, but sometimes a paper check or payroll card.