If you receive a paycheck, you also get a paycheck stub (also called a pay stub). This important document provides details about your earnings, deductions, and net pay. Understanding how to read and interpret your paycheck stub can help you manage your finances, ensure accuracy, and avoid potential payroll errors.
In this guide, we’ll break down each section of a paycheck stub, explain common terms, and help you understand why it matters.
What Is a Paycheck Stub?
A paycheck stub is a document that accompanies your paycheck. It shows:
- Your earnings (salary or wages)
- Taxes and deductions taken out
- Your final take-home pay (net pay)
Paycheck stubs can be paper-based or digital, depending on how your employer issues them.
Why Is a Paycheck Stub Important?
Your paycheck stub is more than just a receipt for your paycheck. It serves several key purposes:
- Proof of Income – Needed for loans, renting an apartment, or applying for credit cards.
- Tax Filing – Helps you verify your earnings and tax withholdings at the end of the year.
- Verifying Deductions – Ensures that the correct amount is taken out for taxes, benefits, and other deductions.
- Detecting Errors – Helps you spot payroll mistakes before they become a bigger issue.
Breakdown of a Paycheck Stub
A paycheck stub contains multiple sections. Let’s go through each part so you can understand what everything means.
1. Employee and Employer Information
This section includes:
- Your name and address
- Your employer’s name and address
- Employee ID or Social Security Number (partially displayed for security reasons)
- Pay period (start and end dates)
The pay period tells you which work period this paycheck covers. For example, if you are paid biweekly, your paycheck stub will cover two weeks of work.
2. Earnings
This section shows your total earnings before deductions. It may include:
- Hourly wage or salary – The base pay rate.
- Regular hours worked – The total hours worked in the pay period.
- Overtime pay – Any additional pay for working extra hours.
- Bonuses or commissions – Extra earnings added to your paycheck.
- Gross pay – The total amount earned before deductions.
Example of an earnings breakdown:
| Description | Hours Worked | Rate | Total Earnings |
|---|---|---|---|
| Regular Pay | 40 | $20 | $800 |
| Overtime | 5 | $30 | $150 |
| Bonus | – | – | $100 |
| Gross Pay | – | – | $1,050 |
3. Taxes and Deductions
Your paycheck stub lists several taxes and deductions taken from your earnings. These can be mandatory (taxes) or voluntary (benefits and retirement contributions).
Federal and State Taxes
- Federal Income Tax – A percentage of your earnings withheld based on your W-4 form.
- State Income Tax – Varies by state (some states do not have income tax).
- Local Taxes – Some cities and counties impose local taxes.
FICA Taxes (Social Security & Medicare)
- Social Security Tax – Employees contribute 6.2% of their wages, and employers match this amount.
- Medicare Tax – Employees contribute 1.45%, and employers match this amount.
Other Deductions
- Health Insurance – If your employer provides medical, dental, or vision insurance, the premium is deducted from your paycheck.
- Retirement Contributions (401k, IRA, Pension) – Pre-tax savings for your retirement.
- Wage Garnishments – Court-ordered deductions for child support, student loans, or other debts.
- Union Dues – If you are part of a union, dues may be deducted from your paycheck.
Example of a deductions breakdown:
| Deduction Type | Amount Deducted |
| Federal Income Tax | $150 |
| State Tax | $50 |
| Social Security | $65 |
| Medicare | $15 |
| Health Insurance | $75 |
| Total Deductions | $355 |
4. Net Pay (Take-Home Pay)
After all deductions, the remaining amount is your net pay—the amount you actually receive in your paycheck.
Formula: Gross Pay – Deductions = Net Pay
Example:
- Gross Pay: $1,050
- Total Deductions: $355
- Net Pay: $695
This is the final amount deposited into your bank account or given to you in a physical check.
Common Paycheck Stub Mistakes to Watch For
Even though payroll systems are automated, mistakes can still happen. Be sure to check your paycheck stub for errors such as:
- Incorrect hours worked or pay rate – Ensure your hours and hourly rate are correct.
- Wrong tax withholdings – If too much or too little tax is deducted, it can affect your tax refund or bill.
- Missing overtime pay – Overtime should be correctly calculated at 1.5 times your regular rate.
- Unexplained deductions – If you see deductions you don’t recognize, contact HR or payroll.
- Incorrect benefits deductions – Ensure that health insurance and retirement contributions match your enrollment.
How to Access and Keep Your Paycheck Stubs
- Online Payroll Portals – Many companies offer digital access to pay stubs through an employee portal.
- Paper Pay Stubs – Some employers provide printed pay stubs with each paycheck.
- Record Keeping – Keep pay stubs for at least a year, or until you file your taxes.
Frequently Asked Questions
1. Why is my paycheck smaller than expected?
Taxes and deductions reduce your take-home pay. Review your paycheck stub to see where your earnings are going.
2. What should I do if I find an error on my paycheck stub?
Report any mistakes to your employer’s HR or payroll department immediately to have them corrected.
3. Can I access my paycheck stubs online?
Many employers provide digital paycheck stubs through payroll systems like ADP, Paychex, or QuickBooks.
4. Why are my taxes different each paycheck?
Taxes may vary due to bonuses, overtime, or changes in tax rates. Your W-4 form also affects how much tax is withheld.
5. How long should I keep my paycheck stubs?
It’s best to keep them for at least one year or until you file your taxes. Some experts recommend keeping them for three years for record-keeping purposes.
Conclusion
Understanding your paycheck stub is essential for managing your finances, ensuring accuracy, and avoiding errors. By reviewing your earnings, deductions, and net pay regularly, you can stay informed and take control of your financial future.
Next time you receive your paycheck, take a few minutes to review your paycheck stub using this guide. If you have questions, don’t hesitate to ask your employer or payroll provider for clarification.
