What Is a Payroll Stub and How Do You Read One?

A payroll stub, also known as a pay stub or payslip, is a document provided by an employer that details an employee’s earnings and all deductions for a specific pay period. This document is essential for understanding how an employee’s gross earnings are calculated and how various withholdings lead to the final net pay.

Essential Details on Your Payroll Stub

A payroll stub includes identifying information for both the employee and the employer. This includes the employee’s name, address, and often an employee identification number. The employer’s company name, address, and Employer Identification Number (EIN) are listed.

The stub also states the pay period dates, indicating the start and end of the work period, along with the actual pay date. Two fundamental figures are gross pay and net pay. Gross pay represents the total amount earned before any deductions, encompassing regular wages, overtime, and any additional compensation. Net pay is the final amount received by the employee after all deductions have been applied.

Decoding Your Earnings and Deductions

Understanding the components of your gross pay and deductions is crucial for comprehending your payroll stub. Gross earnings can stem from several sources, such as regular hourly wages or a fixed salary. Additional earnings like overtime pay, bonuses, or commissions are also included. For hourly employees, the stub shows the hourly rate and the number of hours worked, while salaried employees see their standard pay period amount.

Deductions are categorized into pre-tax, mandatory post-tax, and voluntary post-tax. Pre-tax deductions are subtracted from your gross pay before taxes are calculated, which reduces your taxable income. Common examples include contributions to a 401(k) retirement plan or health insurance premiums, which can lower your overall tax burden.

Mandatory post-tax deductions are legally required withholdings taken after pre-tax deductions and some taxes are calculated. These include federal income tax, state income tax (if applicable), and local income taxes. Federal Insurance Contributions Act (FICA) taxes, comprising Social Security and Medicare, are also mandatory. For 2025, the Social Security tax rate for employees is 6.2% on wages up to $176,100, while the Medicare tax rate is 1.45% on all wages, with no wage base limit. An additional Medicare Tax of 0.9% applies to wages exceeding $200,000 for single filers or $250,000 for married couples filing jointly.

Voluntary post-tax deductions are optional amounts an employee chooses to have withheld from their paycheck after taxes. These can include union dues, additional life insurance premiums, or court-ordered garnishments. The payroll stub itemizes each of these deductions, showing both the amount withheld for the current pay period and the year-to-date (YTD) total.

The Importance of Your Payroll Stub

Regularly reviewing your payroll stub provides several practical benefits. It serves as official proof of income, often required for financial applications such as securing loans, renting a home, or applying for credit.

For tax purposes, your payroll stub summarizes your taxable income and the total amounts withheld for various taxes throughout the year, helping you reconcile with your W-2 form at year-end and prepare your tax returns. Regularly checking your stub allows for early detection of potential errors in hours worked, pay rates, or incorrect deductions. Finally, reviewing your payroll stub is a valuable tool for personal financial planning, allowing you to budget and manage your take-home pay.