Pay Stubs: A Detailed Guide
A pay stub—also known as a pay slip or paycheck stub—outlines important information about the payment you’ve received from an employer. The pay stub itemizes what you’ve earned, as well as any taxes or deductions.
Not every government requires employers to distribute pay stubs, but most do. Many governments also require employers to track the hours worked by employees so that pay can be properly allocated and recorded. This helps with record keeping and protects workers’ rights, ensuring you receive the pay agreed upon.
Knowing the information that your pay stub contains and what that information means can help you track your payments, taxes, and deductions. We’ll explain what you can expect to see on your pay stub.
What kind of information goes on a paycheck stub?
You’ll see various information on your paycheck stub. You’ll encounter differences based on the laws in your country and region. However, there are some common elements.
Pay stubs are beneficial both to businesses and the people they hire. Employers need them for tax purposes, and can resolve many questions regarding worker pay. Professionals can use them to track payments and show proof of income.
To meet all these needs, pay stubs often contain a great deal of information in a very dense format. We explain some terms you might see on a pay stub and what they tell you.
Pay stub formats
Pay stubs can come in a few different formats depending on the job. A pay stub might be attached to a physical paper check.
If you receive your payment through direct deposit, however, it might be separate from the actual check and just serve as a receipt for the payment you’ve received.
You might also be able to access your pay stubs through an online payroll service system. If you have access to electronic pay stubs, make sure to check them regularly to verify your information is correct—the same way you would if you received a paper pay stub.
Employer and employee information
The first thing you may notice is employer and employee information. You’ll see your full name and address, as well as the name and address of your employer.
You’ll also see personal information like your government identification (ID) number, although some numbers might be obscured with asterisks for security reasons. Other terms you might see:
- Compensation type (salary, hourly, etc.)
- Worker type (full time, part time, etc.)
- Check number (Check No.)
- Federal Employer Identification Number (FEIN)
Pay period and date
The paycheck stub will also include the beginning and end of the pay period, which is a recurring period when the hours worked are tracked and calculated. For example, professionals may get paid weekly, biweekly, or monthly. The pay stub will also list the specific pay date—or when money is distributed.
You’ll also typically see the pay rate, which is usually listed as an hourly rate even for salaried (exempt) workers. Note, however, that in most situations payroll systems use this breakdown to satisfy system requirements. If you’re salary, you don’t want to look at the hours recorded here to see if you qualify for overtime pay or other hour-based benefits.
If you are hourly (nonexempt) and worked any overtime hours, the paycheck stub would also show the number of hours worked at the overtime pay rate. Similarly, if you earned income through special circumstances, such as under the Family Medical Leave Act (FMLA), that will be specified.
Terms you might encounter in this portion include:
- Regular hourly pay (Reg Pay)
- Overtime pay (OT), often written as OT@1.5 (meaning that your overtime pay is 1.5 times your regular pay)
- Holiday pay rate (Hol)
- Family and Medical Leave Act (FMLA)
The gross earnings specify how much money you earned before any taxes, deductions, or contributions were taken out. This will generally be in the same section as the pay rate and the number of hours worked. If you’re salaried, your pay stub will likely show that you worked 40 hours, regardless of how many you actually worked.
The gross wages section of the paycheck stub will also include information about any bonuses or other sources of income you may have received. Depending on your region, you might see information about other types of accrued compensation, such as sick leave and bonuses. You might also see your total earnings to date.
Terms you might encounter in this portion include:
- Gross earnings (Gross)
- Sick pay (Sick)
- Vacation pay (Vac)
- Year-to-date earnings (YTD)
Taxes and deductions
Your paycheck will also list the taxes and deductions your employer took out of your paycheck. Payroll software often helps employers correctly calculate how much these deductions should be.
Exact tax deductions are based on regional requirements, but you may see:
- Payroll tax. In the US, the payroll tax includes Social Security and Medicare taxes, also known as Federal Insurance Contributions Act taxes (FICA taxes). You’ll see how much your employer withheld from your paycheck to pay your portion to the federal government.
- Income tax. National income taxes, state income taxes, and any other local income taxes will depend on your withholding allowances.
- State unemployment tax. The State Unemployment Tax Act (SUTA) is an employer-only tax in many states, but Pennsylvania, Alaska, and New Jersey employees are also required to pay the SUTA tax.
You may also see deductions taken out of your paycheck. These deductions are generally optional and will depend on what your employer offers and what you have opted to deduct.
- Health insurance. Employers who offer health insurance typically pay for a portion of the monthly insurance premium, and the other portion is deducted from your paycheck.
- Life insurance. If your employer offers life insurance, you may also see your contribution deducted from your paycheck.
- Retirement plans. Depending on how your employer sets up the retirement fund they offer, you might see deductions for a 401(k) or pension.
- Charitable donations. You might also opt to make certain charitable donations through your paycheck.
- Other potential insurance benefits. If your employer offers employee benefits like disability insurance, you’ll also see any contributions deducted on your paycheck.
- Union dues. If you belong to any type of union, your union dues will also be listed as a deduction.
- Wage garnishments. If your wages are garnished for any reason, such as unpaid taxes to the Internal Revenue Service (IRS) or unpaid child support, you’ll see those amounts taken out of your paycheck.
Terms you might encounter in this section include:
- FICA/Medicare taxes (FICA-Med)
- FICA/Social Security taxes (FICA-SS)
- Federal income tax withholding (FITW, Fed, FWT, or FIT)
- State income tax withholding (SITW, SWT, SIT, or St Tax)
- Any local taxes (Local Tax)
- Retirement fund contributions (Ret or 401k)
- Dental premium contribution (Den)
- Insurance deductions (INS or MED)
- Flexible spending account or health savings account (FSA/HSA)
- Long-term disability to short-term disability withholding (LTD/STD)
- Vision premium (VIS)
- Wage garnishments, either a flat rate or a particular percentage (Garn or Garn%)
- Child support (CHD SU)
If your employer makes contributions toward accounts on your behalf, such as a 401(k) match program, you’ll see their contributions on your pay stub.
Direct deposit information
If you’ve opted to receive your employee pay through direct deposit, you may also see the information printed on your paycheck stub.
Finally, the paycheck will tell you the total amount of pay you’ll receive after subtracting your taxes and payroll deductions, which may have the abbreviation “Net.” This is the current pay that will go into your bank account. You can also refer to this as your take-home pay.
Why is a pay stub essential?
Professionals must pay attention to pay stubs as they come in, as they can play a number of important roles. We discuss a few ways that pay stubs are essential.
Abide by laws and regulations
You’ll encounter different laws and regulations for pay stubs around the world.
In the United States, federal law doesn’t require employers to generate and distribute pay stubs, but many states require some type of pay statement. Federal law does require employers to track hours worked by employees through the Fair Labor Standards Act (FLSA), though. Paycheck stubs can help track this information and maintain compliance with state laws.
In the European Union, employers in member nations have to have a system set up to track the number of hours worked by employees. This system must meet the criteria of being “objective, reliable, and accessible.” Pay stubs through a payroll system that tracks hours and pay rates can help employers fulfill these requirements.
SImilarly, in Australia, employers must track certain types of relevant information, including the hours worked by the employee and their wages and benefits received. The government recommends that employers adopt best practices of tracking hours and pay for all workers so that they don’t have to worry about making payroll mistakes or otherwise incurring a fine from a Fair Work Inspector.
China requires employers to provide employees with pay stubs. These pay stubs must document the pay of the employee as well as any taxes and deductions for that pay period.
And in Japan, employees expect to receive pay slips that detail their pay for that pay period.
It’s a good idea to familiarize yourself with the laws that impact your local country and what they mean for pay stubs.
Ensure accurate payment
You should review your pay stubs to ensure the information they contain is accurate. Double-check for potential errors, and ensure that the hours worked and the relevant pay rates align with what your employer has specified.
Verify that the deductions and final total align with what you expected for a given pay period. For example, hourly workers may want to confirm that their paycheck stub correctly records their overtime pay, holiday pay, and standard pay.
Take any discrepancies to your human resources (HR) department immediately.
Prove employment and salary history
Various situations require proof of employment and salary history. For example, you often need pay stubs or other proof of employment when applying for an apartment or filling out a mortgage application. Having your most recent pay stubs on hand can help provide this documentation.
Help when filing taxes
Pay stubs can also help when you fill out your tax forms. You can use them to enter your income correctly. You’ll also know how much you’ve contributed in taxes throughout the year.
You can also cross-reference your paycheck stubs with the end-of-the-year tax forms you receive from your employer to ensure that your income and tax contributions have all been correctly recorded.
Stay on top of payments
As you can see, pay stubs include critical information that can help you maintain your financial records, keep up with your taxes, and track your payments. And while federal law doesn’t require employers to use pay stubs, they often do because it allows them to easily track hours worked.
Independent professionals may not receive pay stubs. The good news is that Upwork makes it easy to stay on top of your pay information through Earnings Reports. You can audit your overall work on Upwork and see your transaction history, your total earnings by client, and even get a certificate of earnings.
Find the best freelance jobs available today and see how Upwork can help ensure you get the right information when it comes to your earnings.