How to read a pay stub

A pay stub translates an hourly rate or a salary into the amount that reaches a bank account. The format varies by employer and payroll provider, but the lines are standard, and each one has a rule behind it.

Is a pay stub required?

Federal law does not require employers to give employees a pay statement. The Fair Labor Standards Act requires employers to keep records of hours worked and wages paid, listed in DOL’s recordkeeping fact sheet, but not to hand them over each payday. Most states do require a statement, on paper or electronically, with contents set by state law. The stub you receive is therefore shaped by your state’s rule, not a federal template.

Gross pay

The top line is earnings before anything is taken out: hours multiplied by rate for hourly workers, with overtime hours and their premium shown separately; the period’s share of salary for salaried workers; plus commissions, bonuses, tips reported to the employer and other pay. The pay period (weekly, biweekly, semimonthly, monthly) is printed near the top and matters for comparing to an annual figure: a biweekly stub shows one twenty-sixth of annual pay, a semimonthly one twenty-fourth.

For hourly workers, the overtime line is where the rules in overtime basics show up: hours over 40 in the workweek at one and one-half times the regular rate. Where a state sets a daily threshold, a daily overtime line may appear too. For tipped workers, a cash wage line and a reported-tips line may be shown separately; see tipped wages and tip credits.

Federal income tax withholding

The employer estimates the federal income tax due on the year’s pay and withholds a share each period, using the information on the employee’s Form W-4 and the methods in IRS Publication 15-T. The amount is an estimate; the actual tax is settled on the annual return, and the difference becomes a refund or a balance due. A change in the W-4 changes this line and nothing else.

Social Security and Medicare

These are the FICA taxes, and they are not estimates. The employee pays 6.2 percent of wages for Social Security up to an annual wage base that the Social Security Administration sets each year, and 1.45 percent for Medicare on all wages, with an additional 0.9 percent above a threshold. The employer pays matching amounts that do not appear as deductions. Once wages in a year pass the wage base, the Social Security line stops until January.

State and local taxes

Most states withhold income tax, with their own forms and tables; a few have none. Some cities and counties levy a local income or occupational tax. Several states also deduct for state disability or paid family leave insurance. These lines explain most of the difference in net pay between two people with the same gross in different states; see the sister site FastCalc’s state paycheck calculators for the arithmetic.

Pre-tax and post-tax deductions

Contributions to a 401(k) or similar plan, health insurance premiums under a cafeteria plan, flexible spending and health savings accounts, and transit benefits are typically taken before income tax is computed, which lowers the taxable wage on the stub below gross pay. Roth contributions, union dues, garnishments, charitable deductions and loan repayments come after tax. The stub usually shows two wage figures: gross, and taxable wages after pre-tax deductions.

Net pay and year-to-date

Net pay is what is deposited. Beside each line most stubs print a year-to-date total; the year-to-date gross and withholding are the figures that will appear on the Form W-2 in January.

Checking a stub against published wages

The hourly rate on the stub is comparable to the hourly percentiles on this site’s occupation pages, which are straight-time rates before deductions. Annual gross, not net, is comparable to the annual figures. The minimum wage for the state is the floor the hourly line must meet, counting tips where a credit is allowed. This site publishes those reference figures and does not compute a paycheck; FastCalc’s take-home pay calculator does.