Understanding your paycheck stub is essential. Your paycheck stub is included when you get paid. Whether you do direct deposit or get paper checks, the pay stub will show important information about your pay.
There are several key pieces to the paycheck stub – gross earnings, taxes, deductions, and net earnings. There are also other, seemingly, unimportant things on your paycheck. The information included on a paycheck stub include:
- Hours works
- Wages earned – gross and net
- Overtime
- Benefits – i.e. health insurance premium payment, retirement plan contributions
- Taxes – federal, state, fica (social security 6.2, medicare 1.45, and .9 surtax if you earn over $200,000
- Year to date info – hours, wages, taxes, benefits, etc.\
- Personal information – name, address, social security number
- Date of pay period
- Pay rate
- PTO, sick days, vacation days
Why is understanding your paycheck sub so important?
A pay stub is a way of keeping accurate records. It shows what employees worked, what they were paid, what taxes were taken out, retirement contributions, etc.
Because it’s your responsibility to report and address discrepancies. If you think you got paid less than you were supposed to or worked more than what’s reported, you need to bring that up. If your deductions (retirement plan contributions, taxes, health insurance premiums) appear to be less or more than you assumed, you need to bring that up.
Why are those things important?
- What you earn is what allows you to afford to live. If you worked more or worked overtime, and it wasn’t reported correctly, your paycheck can suffer.
- Taxes are incredibly important – if you expect to get money back on your tax return, but come to find out they weren’t withholding enough, you can end up owing instead. Your withholdings are very important to understand.
- Health insurance premiums – if you’re not paying enough, your policy can cancel due to non-payment. What happens then? You go to the doctor and pay through the nose because you don’t have coverage?
- Retirement plan contributions – If they “contribute” too much, you will have less on your check. If they “contribute” too little, your nest egg will suffer.
Paycheck stubs are incredibly important. They help you and your employer keep track of pertinent information, like taxes, health insurance premiums, retirement plan contributions, and your salary. Make sure you understand it and make sure you address any sort of discrepancy. That’s your responsibility.
Related reading:
Three Accounting Tools Every Small Business Needs
Does Health Insurance Affect Your Taxes