What Information Should You See on Your Pay Stub?

A pay stub, also known as a pay statement or wage statement, serves as a comprehensive record detailing an employee’s earnings and all amounts withheld from those earnings. Provided with each paycheck, whether in physical or electronic form, it offers transparency into how compensation is calculated. Understanding the information on a pay stub is important for personal financial management, allowing individuals to verify the accuracy of their pay and track income. It also provides essential documentation for financial activities like applying for loans or managing personal budgets.

Understanding Your Gross Earnings

Gross earnings represent the total an employee earns before any deductions are subtracted. This is the starting point for all pay calculations, reflecting the full value of an individual’s work during a specific pay period.

For hourly employees, gross pay is typically determined by multiplying their hourly rate by hours worked, including overtime. Salaried employees receive a fixed amount per pay period, a portion of their annual salary. Gross earnings can also include bonuses, commissions, and allowances. Regularly review these figures on your pay stub to ensure accuracy and address any discrepancies with your employer’s payroll department.

Navigating Deductions and Withholdings

Deductions and withholdings are amounts subtracted from gross pay, resulting in the net amount received. These deductions fall into several categories, some mandated by law, while others are voluntary contributions. Each reduces take-home pay but serves a specific purpose, from funding government programs to contributing to personal benefits.

Mandatory deductions include taxes employers must withhold. Federal income tax is a key example, with withholding based on the employee’s W-4 form. State and local income taxes are also withheld in many jurisdictions, though requirements vary depending on the employee’s work location.

Another important mandatory deduction is the Federal Insurance Contributions Act (FICA) tax, funding Social Security and Medicare. For 2025, employees contribute 6.2% of their wages up to an annual limit for Social Security, and 1.45% for Medicare, with no wage limit for Medicare. An additional Medicare tax of 0.9% applies to higher earners. Employers are responsible for matching these FICA contributions, except for the additional Medicare tax. Beyond taxes, court-ordered wage garnishments for child support, defaulted loans, or tax levies are also mandatory deductions.

Voluntary deductions are chosen by an employee, often for benefits or savings. Pre-tax deductions, such as health insurance premiums and contributions to retirement plans like a 401(k) or 403(b), reduce an employee’s taxable income, lowering income tax owed. Flexible Spending Accounts (FSAs) also fall into this category, allowing employees to set aside pre-tax funds for eligible healthcare or dependent care expenses. These pre-tax contributions offer immediate tax advantages by reducing income subject to federal and, in most cases, state taxes.

Other voluntary deductions are post-tax deductions, taken after taxes are calculated. Examples include contributions to a Roth 401(k), made with after-tax dollars but allow for tax-free withdrawals in retirement. Union dues, supplemental insurance premiums, and charitable contributions are also common post-tax deductions. While not reducing current taxable income, they serve other financial or personal objectives. Employers must obtain written consent from employees before implementing any voluntary deductions.

Interpreting Net Pay and Year-to-Date Figures

Net pay, often referred to as take-home pay, is the amount an employee actually receives after all mandatory and voluntary deductions. It is the final figure deposited into a bank account or issued as a paycheck. Understanding net pay is fundamental for managing daily expenses and personal budgeting.

Pay stubs also provide year-to-date (YTD) figures, a cumulative summary of earnings and deductions from the beginning of the calendar year up to the current pay period. YTD totals appear for gross pay, all deductions (taxes, benefits, etc.), and net pay. These figures are valuable for tracking income, monitoring tax withholdings, and assessing financial progress. They assist in tax planning, helping determine if enough tax has been withheld or if adjustments are necessary.

Some pay stubs may also display employer contributions, such as the employer’s portion of health insurance premiums or matching contributions to retirement plans. These contributions are part of an employee’s total compensation package but are not deducted from gross pay. Their inclusion highlights the full value of benefits an employer provides beyond direct wages.