Are you trying to figure out the answer to, “What is a pay stub?” Read this article to learn everything you need to know about pay stubs.
So you’ve made it through one month of your first job, and it’s time to get your hard-earned cash. You’re likely to receive a paycheck and another document bundled with your paycheck on the payday.
You can put the paycheck aside; our main focus is the document that comes with the paycheck. This document is what is known as a paystub or a paycheck stub.
So what is a pay stub exactly?
If you’re like most employees, you look at this document and go meh! In this post, we’ll be highlighting all you need to know about pay stubs. Read on and learn what pay stubs are, what information they contain, and why they’re so important.
What Is a Pay Stub?
A pay stub is a document that you received with your weekly, monthly, or yearly paycheck. You can use pay stubs interchangeably with wage statements or payslips. In most states, it’s mandatory for employers to furnish their employees with pay stubs every pay period.
Employers can either send physical pay stubs or send electronic pay stubs. The type of information contained in the pay stubs varies by state. It’s a good idea to keep your pay stub copy for your payroll records.
What Information Does a Paystub Contain?
A pay stub outlines all the information about an employee’s pay. You might have seen something about your net pay, taxes, and some codes that seemingly have no meaning. These codes are actually more important than you’d think.
Here’s a breakdown of all the information that a pay stub contains.
Your gross pay means your salary without taxes or any contributions like retirement and medicare contributions. It’s the salary your employees offer you before you start the job.
There are many ways you can calculate your gross pay, and it depends on whether you’re paid a salary or paid by the hour. If your employer pays you hourly, you just multiply the number of hours you’ve worked by the hourly rate. The salary gross pay is just the amount of payment you’ll receive at the end of the month.
You also get the pay rate with details about your gross pay. That way, you can tell that you’re getting what you worked for. The pay rate, however, only applies to employees who receive payment for the hours they work.
The pay stub also contains details of how much you give Uncle Sam. The amount of taxes you pay to the state depends on your state. In fact, in some states, you don’t have to pay any income tax.
The whole state tax situation is somewhat complicated. In some cases, the state won’t tax you, but you’ll pay taxes to your state of residence. Other states charge a flat rate, while others use tax brackets like those of the IRS.
Federal taxes are taxes the IRS deducts from your gross pay, depending on your tax bracket. It’s a simple formula where the more you earn, the more tax you pay.
Only a few states require employees to pay local taxes. These taxes are intended to help the state streamline local services.
FICA is probably something you see on your pay stub and ignore. FICA abbreviates Federal Insurance Contributions Act. This means its money taken from your salary that contributes to social security and medicare.
Deductions for Insurance Benefits
A portion of your salary may go towards your insurance benefits. These include dental, health, and life insurance. Your pay stub should show you what amount of your salary goes to these benefits.
Back pay is when your employer owes you money aside from your usual salary. For instance, payment because of an adjustment in your salary is back pay. Any money paid by the employer from your last payment is also back pay.
If gross pay is the big salary, you can think of net pay as the small salary. This is your salary minus all the deductions and contributions.
Why Are Pay Stubs So Important?
Pay stubs give a great deal of information in just one document. Most employers use a check stub maker to make it easier for them to create pay stubs. Still, the question remains, why are pay stubs so important?
To Confirm Your Payment Information
You use your paystub to confirm your payment information. It’s through your pay stub that you can note any discrepancies with your payment information. You can then talk to the concerned department to correct your details.
For Housing or a Loan
A pay stub makes securing a loan or an apartment possible. It provides evidence that your income is enough to repay the loan or pay rent for an apartment.
For Your payroll Records
When applying for a new job, the employer might ask you for your recent pay stub. The pay stubs are sufficient evidence of your previous jobs. This is just to verify that the information in your CV is accurate.
In case of any payment dispute with your employer, the court can refer to your pay stubs. You can also use pay stubs to resolve any tax disputes.
Don’t Throw Away Your Pay Stubs
Hopefully, you now know what is a pay stub, and why it’s so important. Remember, if you don’t get a physical copy of your paystub, you can find it online.
Pay stubs aren’t that complicated when you come to think of it, especially now that you know all about it. To learn another new thing, be sure to check out the other pieces on the site.