What Does My Pay Stub Mean – Pay Stub Details Part 1 of 2 – Budget Life!

 

 

Pay Stub Details

This week in the Budget Life! series, we are going to review a pay stub and learn about all the pay stub details that are listed.  In the image above, you will see my pay stub details.  I’ve scrambled many of the details, but you can see the main headings.  Let’s jump right in.

Pay Stub Details – Top Part of the Pay Stub

At the top of every pay stub is the personal details of you and your employer.  While the laws vary by state in regards to what goes in your pay stub details, you can expect some of the following standard items.

  • Your Name and Address – Make sure this information is correct.  I’ve had my name spelled incorrectly, the wrong name listed (Jake instead of my legal name of Jacob), and old addresses.  You want to make any corrections right away because they can cause issues down the road when it comes to tax time.  Make sure your address is up to date at the end of the year so you receive your W2 on time.
  • Your Company’s Information – Your company will list their legal name and address on your pay stub and typically a contact phone number for employees.  When you have a question about your pay stub, the people answering the phone number will usually be able to answer your questions.
  • Your Employee Information – Your pay stub details will often give you more information about your employment status and your employee details than any other single source at your company.  In this case, my pay stub details have my employee ID, my job title and department information.
  • Your Pay Dates – When it comes to how your employer pays you, the differences can vary widely by employer.  In some cases you are paid for work completed, in others you are paid for work not yet completed.  In my case, I am paid for work completed, but vacation time lags another pay period.  The pay stub details will show you the date on which you are paid and the dates that are covered by that pay check.

IDENTITY THEFT ALERT!!! Your pay stub details can show some extremely private details that are candy to fraudsters.  Some states even require employers to print your Social Security Number.  When possible, keep your pay stubs electronic to prevent identity theft.  If you have to print your pay stub details, make sure to shred it afterwards.  Another tip…always fax, never email your pay stub.

Pay Stub Details – Earnings

The fun part of your pay stub details is the Earnings Section.  This section details your hours, wage, vacation time, etc.

  • Gross Pay – When you accepted your job and were told that you would earn $XX,XXX.00 per year and that was your gross pay.  Unfortunately, you cannot simply divide that by 24 or 26 and come up with your take home pay.  Your Gross Pay is what you earn before anything is taken out of your pay check.
  • Net Pay – The more depressing number is the Net Pay.  Your Net Pay is what your pay check actually is.  You may have a gross pay of $1,000 but a net pay of $750.   Your Gross/Net Pay ratio will vary.  In my second job out of college, my net pay was around 64% of my income.  Today, my net pay is 49% of my gross income.  Why the difference?  I pay myself first with my 401k contributions.
  • Hours – If your an hourly employee, you probably look at this section every time you are paid to ensure you were paid for all of your hours (if you don’t, you should).  However, if you are salaried, then you likely never look at this – which is fine.  Even though you are salaried, most employers will still list out your hours and pay by hour as many calculations in their payroll system are calculated off of hours – including vacation pay.
  • Sick Pay / Vacation Pay – When you take off work and are paid, your hours are listed here.  Some companies will let you take time in hours, while others require a full day or half day increments.
  • Holiday Pay – Some companies pay you time and a half for working on a holiday.  Others allow you to take a floating holiday (a holiday that can be used anytime for any reason).
  • Hours / Rate / Amount / Amount YTD – You will typically have multiple columns on your pay stub under your earnings columns.  The Hours will tell you how many hours your are being paid for in each area.  Note that your vacation and sick hours are not the hours you accumulated but are the hours you have used.  The rate is the per hour amount that was paid.  The Amount is the Hours x Rate.  The Amount YTD is the Amount that you have earned in each area year to date (since January 1st).

Vacation Pay – The reason that many companies have a use it or lose it policy for vacation and sick time is due to the balance sheet.  The balance sheet for a company lists the liabilities, which is what the company owes.  This will include any unpaid debts such as outstanding loans, bills not yet paid and unused vacation time.  Companies are required to pay all the money they owe you and this includes unused vacation time.  Make sure you use all of your vacation time every year.  The only one that loses if you don’t is you.

Pay Stub Details – Taxes

Think what you may about taxes (and gripe about it somewhere else), taxes come out of your pay check and are listed in your pay stub details.

  • Federal Withholding Taxes – These are the taxes that are paid directly to the federal government.  A minimum amount is required to come out of your paycheck no matter which withholding box you check and these are called payroll taxes.  You can adjust these to have more taxes withheld – in some cases this may be a wise move.  For example, I have an extra 1o% come out of my pay check to help cover the lack of taxes that I pay for my teaching job and as a savings vehicle.  My wife and I like to get a tax refund every year and use that chuck of money for a home improvement project.
  • State Withholding Taxes – Most states have a state income tax and your taxes will be detailed here.  At the time of this article, the only states that do not have state income taxes are Alaska, Florida, Tennessee, Nevada, Wyoming, South Dakota, Texas, Washington, and New Hampshire.  These taxes are typically withheld with the same filing status as your federal income status. You will not be able to withhold at a married rate for federal taxes and a single rate for state income taxes due to payroll software limitations.
  • Municipal / City Withholding Taxes – Yes, there are some cases where the city or county you live in also has an income tax and this will show up in your pay stub details.
  • Medicare – You pay 1.45% of your gross pay into Medicare so when you turn 65, you have access to “free” health insurance.  I put free in quotes because there are dedications and co-pays that are required.  The reason this program was created is because private insurance companies do not want to cover these high risk (lots of doctor bills) individuals.
  • Social Security (OASD) – OASD is the official name of Social Security – Old Age Survivors Disability.  You pay 4.2% of your gross income into this tax up to certain income limits.

Join us next week for the conclusion of understanding your pay stub details.  If you see something that you don’t understand on your paycheck, call the number listed in the pay stub details or talk to your boss.

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