Why Is My First Paycheck So Low? Common Reasons
Understand the common financial adjustments and timing nuances that can make your first paycheck seem lower than expected. Demystify your initial earnings.
New employees often find their first paycheck lower than anticipated. Several factors contribute to the difference between a gross salary and the actual take-home amount. Understanding these elements can demystify the first paycheck and provide clarity on how earnings are calculated and disbursed.
Common Payroll Deductions
Mandatory payroll deductions reduce your gross pay, funding government programs and benefits. Federal income tax is withheld from your wages to contribute to national services. The amount of federal income tax withheld depends on the information provided on your Form W-4.
Beyond federal income tax, employees also contribute to Federal Insurance Contributions Act (FICA) taxes, which include Social Security and Medicare. For 2025, the Social Security tax rate is 6.2% for employees, applied to earnings up to a wage base limit of $176,100. The Medicare tax rate is 1.45% of all wages, with no income limit. These FICA contributions fund retirement, disability, and healthcare benefits. Many states and local jurisdictions also levy income taxes, which are withheld from your paycheck.
In addition to these mandatory taxes, other common deductions can reduce your take-home pay. These often include contributions for health insurance premiums, which are deducted before taxes, reducing your taxable income. Contributions to retirement plans, such as a 401(k), are another frequent pre-tax deduction. Other voluntary deductions, like union dues or payments for life insurance, are also subtracted from your gross wages.
Pay Period Length and Timing
The timing of your first paycheck often plays a role in why it appears lower than expected. Most employers operate on specific pay period schedules, such as weekly, bi-weekly, or semi-monthly. If your start date falls in the middle of an employer’s established pay cycle, your first paycheck will only cover the portion of the pay period you actually worked.
For example, if a company pays bi-weekly, and you start midway through a two-week period, your first check will only include earnings for one week, or even fewer days. This means you will receive compensation for less than a full pay period’s work, resulting in a reduced initial payment. Subsequent paychecks will then reflect a full pay period, assuming consistent work hours.
Tax Withholding and Form W-4
Federal income tax withheld depends on information provided on Form W-4, the Employee’s Withholding Certificate. This IRS form instructs your employer on how much tax to deduct from gross wages based on your tax situation. Incorrectly completing this form can lead to either too much or too little tax being withheld.
Common scenarios that can result in higher withholding include selecting “Single” as your filing status, or choosing not to claim any dependents in Step 3 of the form. If you have multiple jobs or your spouse also works, and you do not properly account for this in Step 2 of the W-4, your withholding may be insufficient or excessive. The IRS provides a Tax Withholding Estimator tool to help you accurately determine the amount to withhold. If you believe too much or too little tax is being withheld, you can submit a new Form W-4 to your employer to adjust your withholding.
Decoding Your Pay Stub
Understanding your pay stub is important for verifying your earnings and deductions. A pay stub typically details your gross pay (total earnings before any deductions) and your net pay (the amount you actually receive). It also provides a breakdown of withholdings, including federal, state, and FICA taxes.
You can locate specific line items for federal income tax, Social Security (often abbreviated as OASDI or FICA-SS), and Medicare (FICA-MED). Additionally, the stub will list any voluntary deductions for benefits like health insurance or retirement plan contributions. The pay stub also shows the pay period dates and your year-to-date earnings and deductions. Comparing the hours worked and your pay rate listed on the stub against your expectations helps ensure accuracy. If any information on your pay stub is unclear or appears incorrect, contacting your human resources or payroll department is advisable.