A pay stub shows you an itemized list of what your employer has deducted from your salary and contains valuable information about where your money is going.
This is something that you should not ignore.
Bruce Godfrey, a Maryland-based employment attorney, said, “An employee is advised to have a cautious approach to his or her salary whereabouts.” “Keep every pay stub, which most people don’t want to do, or enter the key data for each stub on a spreadsheet.”
Godfrey personally uses a spreadsheet to keep track of each pay period’s gross income, 401K withholding and its bonuses, as well as the year-to-date totals for each. “I don’t want to depend on employers’ computers for that,” he said. “I want to have it.”
The Fair Labor Standards Act requires most employers to keep time and pay records for employees, including total wages paid each pay period, overtime earnings, and hourly rates. Most states also require employers to provide this information on pay whereabouts to employees.
Your pay stub may be attached to a paper check or viewed in your company’s online payroll system.
Sometimes, the pay stub may contain accounting or tax errors or other inaccuracies. In the worst case, they can reveal that workers are being paid less.
“It’s not so common that employers just mess with the pay where [like] A transcription error or data entry error,” Godfrey said. “The fault behind the pay stub lies in the decision not to pay an employee who is entitled to overtime, or not to pay the employee as agreed, or to illegally dock one’s pay.”
Here are some important terms to understand so you know what your paycheck should look like and that you should double-check regularly.
1. Name and Address of the Employer
Generally, a pay stub should list the employer and where it is located. It sounds basic, but if it’s missing, it could be a sign that something is wrong.
In Washington, D.C., for example, getting a personal check would be a red flag, said Sarah Bessel, an attorney with the Washington Lawyers’ Committee on Civil Rights and Urban Affairs.
An example of an incorrect pay location would be “just a personal check [a] Dollar amount,” she said. “And it may contain a short memo about the number of hours worked, but it lacks all the record requirements that DC law typically requires,” including some of the items and calculations below.
“The number one thing people fail to do is figure out what they’re actually owed. If you’re hourly, keep a record of the hours you worked.”
—Donna Ballman, employment attorney
2. Gross Income or Gross Salary
Gross income is the total amount of money you earned during the specified payment period.
“The most important line on the pay stub is gross pay. If gross pay is wrong, then everything else is wrong,” Godfrey said.
3. Net Incme on gold net
Your employer takes money from your pay for taxes and benefits, and the money left in your paycheck after these deductions is known as take-home pay, or net income.
4. Hours and Rates
This is blank if you are a salaried employee. But if you’re an hourly worker, keep a close eye on whether your employer is enlisting and paying you. All the time you work. If you qualify for overtime, your overtime hours and rate should also appear.
As Florida-based employment attorney Donna Ballman told HuffPost, “The number one thing people fail to do is figure out what they’re actually owed. If you’re hourly, that’s the hours you worked.” Keep a record of it,” she said.
“Know how many hours you’re entitled to paid. If you worked more than 40 hours in a week, make sure they’re paying you an hour and a half. If you keep a daily record of your hours, that’s it. It can be used as evidence.”
If your employer pays you wages, it should appear in your pay stub in some form or the other. “It really varies per employer how it will appear,” Sage said. For example, an employee who has received a pay raise may see a retrospective pay listed as its own line item.
6. Pay Period
It shows the start and end date of the period for which you are being paid. “Most states require that an employer establish a regular pay period,” Godfrey said. This can be an event such as every Friday, on a bi-weekly basis or twice a month on fixed days.
Small employers “sometimes will pay employees chaotically,” Godfrey said. “They will pay on the 3rd and then the 14th and then not until the 17th of the following month. This is illegal under most state laws, and is also a sign that the employer is recklessly disobeying overtime laws, because the employer must Must be strictly calculated week by week.
If you see “Year-to-Date” or “YTD” next to your net or gross pay, this is the total amount of wages paid to you from the beginning of the year to the end of the pay period on the check.
,Any year so far will be from January 1 to this point now,” sMinnie Sage, program director of Tax-Aid, a nonprofit that provides free tax services in the San Francisco Bay Area. “The year-to-date is how much you earned cumulatively.”
8. Federal Holding
This money is withheld to pay your federal income taxes. It’s deducted each payment period and sent to the IRS so that you don’t have to pay it in one big lump every year when you file your taxes.
When you start a new job, you fill out a W-4 form so that your employer can withhold the correct amount of federal income tax according to factors including the filing status you indicate and the number of dependents you claim. Sage recommends using the IRS’s Free Tax Withholding Estimator to see the ideal withholding amount for your individual situation. Changes can be made to your W-4 at any time.
“One thing that many people don’t know is that you can view your contributions at any time of the year. It shouldn’t just happen when you are hired,” she said. You can contact your employer at any time to adjust the information on your W-4, which in turn adjusts the amount of your federal withholding.
9. State and Local Taxes
If your state has income tax, this money is deducted each pay period, so you don’t have to pay a large amount when you file. Some cities and counties may also impose taxes.
10. OSDI and Medicare
Both you and your employer are required to contribute a percentage of your taxable wages to Social Security and Medicare. The current base rate for Social Security is 6.2% each, according to the IRS, and 1.45% each for Medicare.
If you see the words “OASDI” on your base, that’s for your Social Security taxes, aka the Old Age, Survivor and Disability Insurance Program.
If you see “FICA” on your salary basis, that stands for the Federal Insurance Contribution Act, and it indicates the combined employee and employer portion of your mandatory OASDI and Medicare taxes.
These numbers are correct.
Godfrey said, “Since there are recipients of this money who have a fiduciary duty to get the numbers right… or selfish interests, they often don’t mess around.”
11. Other Deductions and Costs
Other costs taken from your paycheck can include health insurance, disability insurance, union dues and contributions to your 401(k) retirement account. Some of these deductions may be “pre-tax,” meaning they are deducted from your gross income before federal or state tax rates apply, leaving more money in your pocket.
If you face deductions from your pay for uniforms or cleaning, Basel recommends keeping a close eye on those deductions.
“At least in D.C., your employer is allowed to deduct something like this, as long as it doesn’t reduce your wages to less than the minimum wage,” she said. “A deduction like this may be fine, but you just want to double check and be sure.”