When you get paid, do you understand what all of the different parts of your paycheck mean? If you’re like many people, you might not. 42% of American workers say that they have a hard time understanding what everything means.
Luckily, understanding how to read a pay stub isn’t hard—it just requires you to have a bit of background knowledge. Once you have that, you’ll have no problem tracking where your money is going.
So what do you need to know?
Keep reading to learn all about what the different pay stub information means, as well as how to go about understanding it all.
Contents
What Is a Pay Stub?
A pay stub is just another word for a payslip or paycheck. Your pay stub breaks down exactly how much money you earn over a given period of time.
The thing that many people don’t understand is why their take-home amount on their paycheck is less than their actual salary. If someone makes $20 an hour, why do they only get $17?
That’s because different parts of your salary go towards different things. Your pay stub breaks down where everything goes for you.
What Is Included on a Pay Stub?
If you just started making money, you’ll want to have a clear understanding of what everything on your pay stub means. Let’s take a look at the different parts.
Gross Pay
This is the amount of money that you make before deductions. It’s also the salary that employers advertise when creating job advertisements.
It looks nice, but don’t fixate on it too much.
Taxes Withheld
You’ll find three different sections for taxes. The exact amount that you end up paying depends on your salary and where you’ll live.
- Local: Certain areas require you to put money towards local government
- State: Different states have different tax rates, so be clear on what the tax laws are in your state
- Federal: What you pay in federal taxes depends on your tax bracket
This information can be confusing for employers in addition to employees. If you need some guidance, try using the pay stubs maker.
Insurance Deductions
Your employer will deduct different insurance benefits from your salary. This includes things like vision and dental.
Retirement Contributions
If you pay into a 401k or pension program, you’ll see that money here. You’ll also see FICA, which includes Social Security and Medicare.
Wage Garnishments
Sometimes, your employer will withhold a part of your salary to pay off a debt. That often includes things like child support.
Net Pay
Net pay is the amount of money that you take home after all of the deductions. Refer to this number to see how much you make.
Understand How to Read a Pay Stub
There’s a lot of information on pay stubs, and that can make them hard to read. If you’re unsure how to read a pay stub, use this guide as a reference for the next time you get paid.
In doing so, you’ll be able to understand exactly where the money you make is going.
Do you now have a better understanding of how to go about reading a pay stub? If you do, make sure to check out some of our other posts for more helpful guides and tips.
