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Did you know that as of 2019, there were over 157 million workers that make up the U.S. workforce?
There are many things you should know about your employment or if you’re a business owner, about your employees. One of the things you need to know about is employment pay stubs.
In this guide, we’ll explore everything to do with employment pay stubs, including what is a pay stub, what the information all means, and how to read a pay stub.
What Is a Pay Stub?
The first thing you need to understand whether you’re an employee or an employer is what is a pay stub? A pay stub, also known as a payslip or a paycheck stub, is a document that details your employment details and the pay that you’ve received for that paycheck.
A pay stub also details the amount of money you’ve earned during your time at an organization and how much tax you’ve paid.
The information that is included on your pay stub may differ, and that’s because every state has different regulations when it comes to including pay stub information. In some states, pay stubs are compulsory, while in others you might not have to receive one (but can still request it from your employer).
Pay stubs are important and should be kept for your payroll records. For example, if you think that you’ve paid too much tax, then you’ll need to refer to the pay stub when you inquire into this. Pay stubs can also be proof of employment.
What does a pay stub look like? A pay stub can differ in appearance. That’s because, as we’ve mentioned, some pay stubs may have more information and tax details than others.
You can receive your pay stub with your paycheck. This might be handed to you as a physical copy. Alternatively, your employer might provide you with details of where you can find your digital copy of the pay stub and your paycheck.
If you’re an employer, then you need to make sure that you make pay stubs accessible to your employees. This can either be in physical or digital form. You can create your own real check stubs using templates, or there is software that can make them for you.
How to Read a Pay Stub
When you’re reading a pay stub, you’ll notice that there is a lot of information. You might see your details, your employer’s details, your wages, your taxes and deductions, your net pay, and other details. That’s why a lot of people get confused when reading their pay stubs.
But there are three main categories that you need to focus on. These categories include your gross wages, your taxes and deductions, and your net pay.
The gross wage or gross pay is the money that your employer owes you before taxes and deductions are taken off. Your gross wage will be calculated either by your paid salary divided by the number of months you work, or by the number of hours you’ve worked.
The gross wage will include your current gross pay and your year-to-date gross pay. The current gross salary will be how much you have earned during that pay period. The year-to-date gross pay will be how much you’ve received during your time at the business.
As well as your gross pay, you’ll see that your pay stub includes the number of hours you’ve worked (to achieve your gross pay) and your pay rate. These are both included for your information, so you can check that you’ve been paid correctly.
Taxes and Deductions
Sadly your gross wage isn’t your take-home income. The gross wage is the amount you earn before taxes and deductions. That’s why you need to know how to read this section of your pay stub.
Taxes and deductions refer to a number of contributions that you make to the payroll and to things such as your pension scheme. Just like your gross wages, you’ll see the current taxes and deductions and the year-to-date taxes and deductions.
Your pay might be taxed for government agencies, state and local income taxes, federal income tax, and for FICA tax.
Your pay might also have deductions for employee benefits, such as pension contributions and insurance premiums.
Your employer might also detail their own tax and deduction contributions. This is money that doesn’t come out of your overall pay, but instead out of their business. For example, your employer might contribute to your benefits or pay tax for having you as an employee.
The final and most important part for you to look at is the net pay. This is the amount of money you receive after tax and deductions are subtracted from your gross wage. The net pay is known as your take-home money.
Similar to the gross wages and taxes and deduction sections, the net pay also includes details on your current net pay and your year-to-date pay.
If you believe that there is an issue with your net pay, then you should use subtract the taxes and deduction amount from the amount of the gross wages you have. This information should create accurate net pay.
Understand Your Pay Stub
Are you confused by your pay stub? Do you want to know what is a pay stub and how you can read it? Follow our guide to learn more about pay stubs and why they’re important to keep safe.
Be sure to check out some of our other business-related articles to keep up to date with the latest industry news and trends.