If you’re an employer, it’s important to learn the information that should be included in a pay stub. This helps in identifying and fixing all payroll errors. Besides, having the right information on a pay stubs helps your employees in deciphering their paychecks. Read on to learn more about the details included in a pay stub.
What should be included on a pay stub?
Gross pay: This is the pay before the deductions for local, state, and federal taxes, Social Security, Medicare, and all retirement or insurance deductions. The gross pay is simply the amount that the employer lists when making a job offer.
Federal taxes withheld: The amount of federal tax withheld majorly depends on your tax bracket. As of 2017, the United States income tax operates on a graduated scale, beginning at 10% and increasing to 39.6%. Thus, the amount of federal tax withheld will depend on the amount of your personal income.
State taxes withheld: Each state has a specific set personal income tax rates. Some states have bracketed taxes similar to the IRS and others have set a flat rate. Some cases are complex. For example, if you live in one state and work in a different state, both states can’t tax the same income. However, that doesn’t mean that you are off the hook.
Local taxes withheld: Metro areas such as the New York City set their local taxes. The collected taxes pay for local government services.
Insurance deductions: Life, health, vision, disability, and dental insurance deductions are also recorded in a pay stub. Not everyone has all these types of insurance, and thus, your employer will include your specific insurance deductions if any.
FICA: Probably you have seen FICA on your pay stub, and you don’t know what it is. Federal Insurance Contributions Act is your contribution to Social Security and Medicare.
A pension plan or retirement contribution: In case your employers provide retirement benefits plan such as pension, 401k or 403b, your contributions will be recorded in your pay stub.
Wage garnishments: This is the amount of your paycheck withheld by your employer to repay your debt such as child support payments or tax bills.
Back pay: In case your employer owes you back pay, probably because of an adjustment to your job (salaried or hourly), the amount will be listed on your pay stub.
Net pay: This is the total amount you will receive after all deductions have been made. It’s your actual paycheck.
Remember, pay stubs may also contain a year-to-date total amount of deductions and gross and net earnings. Whenever you have questions about the items listed on your pay stub, it’s wise to check with your manager or the Human Resource department. These professionals can help you understand your current deductions and how you can make changes to what has been withheld from your gross pay.
All employees should know that copies of pay stubs are required for employment verification or when applying for credit. Therefore, it’s advisable to save copies of your payslip.