Introduction
If you’re like most people, you probably glance at your paycheck, see the total amount deposited, and move on. But your pay stub—the breakdown of your earnings and deductions—contains valuable information about your income, taxes, and benefits. Understanding it helps you spot errors, budget more effectively, and make better financial decisions.
In this guide, we’ll break down the common sections of a pay stub, explain what each deduction means, and show you how to check that you’re being paid correctly.
What Is a Pay Stub?
A pay stub (also called a paycheck stub or earnings statement) is a document from your employer that shows how your pay is calculated. It usually comes with each paycheck, whether in paper form or as an online record.
It includes:
- Gross pay – The total you earned before deductions
- Deductions – Taxes, insurance, retirement contributions, and more
- Net pay – The amount you actually take home after deductions
Why It’s Important to Read Your Pay Stub
- Spot Errors Early – Mistakes in hours worked, overtime, or deductions can cost you money if unnoticed.
- Understand Where Your Money Goes – Knowing your tax withholdings and benefits costs helps you plan your budget.
- Track Retirement and Insurance Contributions – Your pay stub shows how much you’re saving for the future or paying for benefits.
- Keep Records for Loans or Taxes – Lenders and tax preparers may request pay stubs as proof of income.
Main Sections of a Pay Stub
- Employee Information
Your name, employee ID, pay period, and sometimes your address. Make sure these details are correct. - Gross Pay
This is your total earnings before any deductions are taken out. It includes:
- Regular wages or salary
- Overtime pay
- Bonuses or commissions
- Any other taxable income from your employer
- Taxes
Taxes are one of the biggest deductions. Common ones include:
- Federal Income Tax – Based on the W-4 form you filled out when you started your job.
- State and Local Taxes – Vary depending on where you live.
- Social Security Tax (FICA) – A fixed percentage (6.2% in the U.S.) that goes toward your future Social Security benefits.
- Medicare Tax (FICA) – A fixed percentage (1.45%) that funds healthcare for retirees.
- Benefits and Other Deductions
These vary by employer but may include:
- Health, Dental, and Vision Insurance – Premiums you pay for coverage.
- Retirement Contributions – Money you put into a 401(k), IRA, or pension plan.
- Life or Disability Insurance – Optional coverage deducted from your pay.
- Union Dues – If you belong to a union.
- Garnishments – Court-ordered deductions for debts like child support.
- Employer Contributions
Some pay stubs show what your employer pays on your behalf, such as matching retirement contributions or covering part of your insurance premium. This isn’t part of your take-home pay, but it’s valuable compensation. - Year-to-Date (YTD) Totals
This column shows how much you’ve earned and how much has been deducted since the start of the year. It’s useful for tracking progress toward tax brackets or retirement contribution limits.
How to Check Your Pay Stub for Accuracy
- Verify Hours Worked – Compare to your timesheets or schedule.
- Check Overtime Rates – Make sure overtime pay (usually 1.5× your regular rate) is correct.
- Confirm Deductions – Ensure taxes and benefits match what you signed up for.
- Look for Unexpected Changes – A sudden difference in net pay might mean an error.
Example: Reading a Pay Stub
Let’s say you earn $20/hour and work 80 hours in a two-week period. You also get $100 in overtime.
- Gross Pay = (80 × $20) + $100 = $1,700
- Deductions:
- Federal Income Tax: $170
- Social Security: $105.40
- Medicare: $24.65
- Health Insurance: $80
- Retirement: $50
- Total Deductions = $430.05
- Net Pay = $1,269.95
This breakdown shows exactly where your money went before it reached your bank account.
Tips for Managing Your Pay Stub Information
- Keep Digital or Paper Copies – Store them for at least one year, or longer for tax purposes.
- Review Every Pay Period – Errors are easier to fix if caught early.
- Understand Your Withholding – Too much tax withheld means a bigger refund but less cash during the year; too little means you might owe at tax time.
- Track Benefits Costs – Compare them annually during open enrollment to see if you’re getting the best value.
Common Questions About Pay Stubs
Q: My net pay is much lower than my gross pay. Is this normal?
Yes, deductions for taxes, insurance, and retirement can take a significant portion of your earnings.
Q: Can I change how much tax is withheld?
Yes, by updating your W-4 form with your employer.
Q: What if I don’t get a pay stub?
Some states require employers to provide them, but if yours doesn’t, you can request a copy or access it through your payroll portal.
Final Thoughts
Your pay stub is more than just a piece of paper—it’s a financial roadmap that shows exactly how your earnings are distributed. By taking a few minutes each payday to review it, you can catch mistakes, understand your benefits, and take better control of your finances.
The more familiar you are with your pay stub, the more empowered you’ll be to make smart money decisions.