A paycheck stub shows you a detailed list of what your employer deducted from your pay and contains valuable information about where your money is going.
How to read paycheck to make sure it’s correct
It is something you should not ignore
“An employee is advised to be vigilant about their pay stub,” said Bruce Godfrey, a Maryland-based employment attorney. “Keep each pay stub, which most people don’t want to do, or enter the main data for each stub into a spreadsheet.” Godfrey personally uses a spreadsheet to track each pay period’s gross earnings, 401K retention and bonuses, plus year-to-date totals for each. “I don’t want to rely on the employer’s computers for that,” he said. “I want to own it.”
Most employers are required by the Fair Labor Standards Act to keep employee time and pay records, including total wages paid each pay period, overtime earnings, and hourly rates. Most states also require employers to provide this information on a pay stub to employees. Your pay stub can be attached to a paper check or can be viewed in your company’s online payroll system. Sometimes a pay stub may contain accounting, tax, or other errors. At worst, they can reveal that workers are having their wages cut.
It’s not that common for employers to screw up pay stubs
A transcription or data entry error,” Godfrey said. “The error happens behind the pay stub in the decision not to pay a worker who is entitled to overtime, or not pay the worker what was agreed, or illegally deduct someone’s salary.” Here are some key terms to understand so you know what your paycheck should look like and what to check regularly.
Employer name and address
Generally, a pay stub should list the employer and where it is located. That seems basic, but if it’s missing, it could be a sign that something is wrong. In Washington, DC, for example, receiving a personal check would be a red flag, said Sarah Bessel, an attorney with the Washington Lawyers Committee on Civil Rights and Urban Affairs.
An example of an incorrect paycheck stub “would simply be a personal check with [a] dollar amount,” he said. “And you may have a brief memorandum on the number of hours worked, but it lacks all of the recordkeeping requirements that DC law generally requires,” including some of the items and calculations below.
Gross income or gross salary
Gross income is the total amount of money you earned during the pay period shown. “The most important line on a pay stub is the gross salary. If gross pay is wrong, everything else is wrong,” Godfrey said.
Net income or net payment
This is blank if you are a salaried employee. But if you’re an hourly employee, keep a close eye on whether your employer includes you and pays you for all of the time you work. If you are eligible for overtime, your overtime hours and rate should also be reflected.
As Florida employment attorney Donna Bellman told the Huff Post, “The first thing people don’t do is keep track of what they’re really owed. If you work hourly, keep a record of the hours you worked,” he said. “Know how many hours you are entitled to be paid. If you worked more than 40 hours in any week, make sure you get paid time and a half. If you keep a daily record of your hours, it can be used as evidence.”
If your employer owes you wages, that should be reflected on your pay stub in some way. “It really varies by employer how that will show up,” Sage said. For example, an employee who got a raise may see retroactive pay in their own line item.
This shows the start and end dates of the period for which you are paid. “Most states require an employer to establish a regular pay period,” Godfrey said. This could be a schedule like every Friday, every other week, or twice a month on set days.
Small employers “will sometimes pay employees in a chaotic way,” Godfrey said. “They will pay on three and then on the 14th and then not until the 17th of next month. That’s illegal under most state laws, and it’s also a sign that the employer is recklessly ignoring overtime laws, because the employer must calculate strictly by the week.” A typical paycheck shows gross income, net income, deductions, and more.
This money is withheld to pay your federal income taxes. It’s deducted each pay period and sent to the IRS. So you don’t have to pay it all at once each year when you file your taxes.
When you start a new job, you fill out a W-4 form so your employer can withhold the correct amount of federal income tax based on factors including the filing status you report and the number of dependents you claim. Sage recommends using the Internal Revenue Service (IRS) free withholding calculator so you can see the ideal withholding amount for your personal situation. Changes to your W-4 can be made at any time.
“The one thing a lot of people don’t know is that you can check your contributions at any time of the year. It doesn’t have to be just when you get hired,” he said. If you experience a change, such as having a child or getting married, you can contact your employer at any time to adjust the information on your W-4, which in turn adjusts your federal withholding amount.