Understanding Pay Stubs
Understanding Pay Stubs
They may email a pay stub notification to each employee or have a secure log on set up for each employee to sign on and view their pay stub at their own time.
The electronic capabilities benefit companies and employees for a number of reasons. Companies save money on paper and mailing expenses, the software stream lines payroll, benefits, and compensation processes reducing chance of error, and it keeps information centralized for easy research or editing. On the other hand, it reduces the amount of mail and paperwork that employees receive, it gives them the capability of accessing their paycheck at any online location, and it makes researching or gathering payroll information much easier.
Since electronic employee management software has made it easier to obtain and view pay stubs, it gives us all the more reason to be sure we understand what we are looking at. Important financial, tax, and benefit information that we should all pay attention to is listed.
Pay Stub layouts vary from company to company but they will all include the following...
Personal Information - This includes the company name, employee name, address, and possibly the employee social security number.
Important Dates - Dates listed will include the pay period start and end date, and the date of the check or pay stub issuance. Some sections also include a Year-to-date column to show how much you were paid, how much was withheld, or how much was deducted so far that year.
Taxable Earnings - This is the amount of income that is earned for the specific pay period.
Net Pay - This is the amount of income received for "take home" after all necessary withholdings. This will match the amount of your physical pay check or direct deposit pay.
Federal Tax - This is an income tax withholding that every employee pays. The percentage withheld depends on the amount of income you make and the information you listed on your W-4.
State Tax - The state income tax withholding is not mandatory for everyone. It depends on what state you live in and their tax laws. It is also a percentage depending on what you make.
Social Security - This is the US system of supplemental retirement money. Every employee contributes the same percentage of their gross income. Employers contribute a matching percentage as well.
Medicare - This is the US government insurance plan. It provides medical benefits to the disabled and retired workers over 65 years old. All employees and employers pay a matching percentage of gross income.
Other information that could be listed on your pay stub includes...
Insurance Medical, dental, and/or life insurance deductions are listed on your pay stub. They usually show the amount that you paid and the amount that your employer paid for you.
Retirement Savings Plan - If you participate in a 401K or other form of retirement savings where the funds are deducted from your pay, this information is usually included. The percentage is of your pre-tax income.
Health Savings Account - If you participate in a medical expense account where deductions are taken from your pay, this will show on your pay stub as a pre-tax percentage.
Hopefully these explanations will help you to better understand your pay stub. Electronic employee management software provides convenient access but it is the employee's job to review their information and ensure that what they are reading is correct.
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