HR Resources: How to Read a Pay Stub With Lesson Plans

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When you earn money at a job, you’ll probably get a pay stub with each paycheck. Many people don’t bother reading their pay stubs, as they’re more concerned with the money they’ve earned on payday.


The information presented on a pay stub is both helpful and important. If you don’t read your pay stub, you won’t know about the deductions subtracted from your paycheck, and you won’t know where your money is going.

Your paycheck is much more than what amount of money is coming to you that day; it should really be viewed as that and as a report of what’s happening with you financially so far that year. Understanding how to read a pay stub can help you analyze that report accurately, quickly and efficiently such that you can plan ahead for what’s coming better and you can spot potential problems. Knowing how to read a paycheck will allow you to correct those problems sooner than later, or even after it’s too late.

One of the worst things that can happen to people who don’t understand how to read a pay stub is that come tax time, they wind up having to pay in at the state and/or federal levels because they weren’t having enough money withheld from their paychecks throughout the year. Most people who are paid as employees will assume that, if anything, they’ll be in line for a refund when they file their tax returns, which makes this situation that much more of a difficult surprise to encounter.

Learn how to read and understand a pay stub so you can track your earnings and deductions. You might also want to use a paycheck calculator to figure out your take-home pay. If you do understand how to read a pay stub and you spot a problem, then you should make whatever changes are necessary to best fit your situation. That may involve changing your tax forms with your employer to have more – or potentially less – withheld from your paychecks.

Below you’ll find some common entries on paychecks that will help you master the process of how to read a pay stub.

1. Pay Period: The pay period is the date range covered on the pay stub. You might be paid weekly, biweekly, or monthly, depending on your company’s payment policy. The pay period will be important to know if you ever need to contest errors with paid leave or deductions.

2. Gross Pay: The gross pay is the total income you earned during a specific pay period. Gross pay is your earnings before deductions, and it should always correspond with your salary amount.

3. Net Pay: The net pay is the amount of money you earn after deductions are subtracted from the gross pay. The net pay is the amount paid with your paycheck, whether by direct deposit or with an actual check.

4. Taxes: The taxes deducted from your paycheck will include federal, state, and possibly local taxes. Federal taxes are based on your earnings and deducted according to the exemptions you indicated on the W-4 form you filled out with your employer. State taxes are based on the unique policies of your state of residence. Local taxes are somewhat uncommon, but some municipalities deduct local taxes from residents’ income. The Federal Insurance Contributions Act, or FICA, includes money withheld to fund programs such as Social Security.

5. Medicare: Medicare is a mandatory deduction from gross pay to pay for health insurance for retirees and disabled people. Your employer will match your contribution to Medicare.

6. Social Security: Social Security is a mandatory deduction from gross pay. Your deductions will be matched by your employer and placed into an account that you can access later.

7. Year-to-Date Information: The year-to-date information contained on your pay stub shows the total amount of money withheld for the different categories. Monitoring year-to-date information helps you track how much taxes and other money has been withheld during the calendar year.

8. Health Insurance: If your employer offers health insurance, you may have a deduction to help pay for your coverage.

9. Employer-Sponsored Retirement Account Contributions: Your employer may also offer a savings plan that you can contribute to each paycheck.

10. Flexible Spending Account: Some employers set up accounts for employees that allow them to save pre-tax earnings to use to pay for medical expenses.

11. Health Savings Account: This account enables you to save pre-tax earnings to pay for medical expenses. Employees with high-deductible insurance plans may have this benefit.

12. Leave Balance: A leave balance shows the amount of paid leave you have available for the current year.


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