Pay stub

What Is a Pay Stub?

Every time someone gets paid, whether by paper check, direct deposit, or even a payroll card, there’s usually a pay stub, pay slip, or payment stub attached. But what exactly is a pay stub, and why is it such an essential part of getting paid? In today’s digital world, understanding pay stubs is key for employees, employers, and anyone managing their budget or finances. Let’s break down what a pay stub really means, what information it includes, and how deciphering yours can help you make smarter financial decisions.

Understanding the Purpose of a Pay Stub

A pay stub, or paystub, as it’s sometimes called, is an essential document provided to employees each pay period that details their earnings, deductions, and net pay for that cycle. While traditionally attached to a paycheck, pay stubs are now often delivered digitally through payroll software, online portals, or emailed as electronic pay stubs.

The main purpose of a pay stub is transparency. It clearly lists gross earnings (the total before deductions), itemized deductions like Social Security taxes and health insurance premiums, and the net pay that gets deposited in the employee’s bank account. For employers, issuing pay stubs is not only best practice but also required by law in most states.

Paycheck stubs or wage statements help both employees and businesses keep accurate payroll records, making it easier to resolve disputes, report income to tax authorities, and provide the necessary paperwork for things like loan applications or renting property. So, whether referred to as a pay statement, check stub, payslip, or payroll stub, its job is to provide a clear, detailed breakdown of every paycheck.

Key Information Found on a Pay Stub

A modern pay stub contains a wealth of important details. Here’s what typically appears on a standard pay stub example:

Employee information: Name, employee number, and sometimes Social Security Number (partially masked for security).
Pay period: The start and end dates for which the wages are paid.
Hours worked: Regular, overtime, and sometimes paid time off, sick leave, and vacation leave hours.
Pay rate: Hourly rate or salary used to calculate gross earnings.
Gross pay/gross salary: Total pay before any deductions, including overtime pay or bonuses.
Deductions: Federal taxes, state taxes, FICA tax (including Social Security taxes and Medicare taxes), State Disability Insurance, health insurance premiums, retirement plan contributions, and other payroll deductions.
Employer contributions: Amounts an employer pays toward benefits like health insurance, retirement plans, or employer taxes.
Net pay/net earnings: The amount left after deductions—the take-home pay sent via direct deposit, paper check, or loaded on a payroll card.
Year-to-date (YTD) totals: Cumulative numbers for pay and deductions for the calendar year so far.

Digital pay stubs may also note how wages were delivered (e.g., electronic transfer to a bank account), and where to access the full payroll record via a payroll portal or online portal.

Common Terms and Deductions Explained

Reading a pay stub for the first time can be confusing—so much finance jargon, so many lines. Here’s a quick explanation of some terms and payroll deductions you’ll almost always encounter:

Gross pay/gross earnings/gross wages: Total earnings before deductions, calculated by multiplying pay rate (hourly rate or salary) by hours worked and adding overtime pay, bonuses, or commissions.
Net pay/net earnings: What remains after all withholdings and payroll deductions—what you actually receive in your bank account.
FICA tax: The Federal Insurance Contributions Act payroll tax, which funds Social Security and Medicare.
Social Security, Social Security taxes, Social Security tax: One part of FICA tax (6.2% for both employee and employer), used to fund federal retirement benefits. In 2025, only the first $176,100 of earnings is subject to Social Security tax.
Medicare taxes: The other part of FICA taxes (1.45% for both employee and employer), funding health care for seniors and certain disabled individuals. High earners pay an additional 0.9% Medicare tax on earnings over $200,000.
Federal taxes/State taxes: Income taxes withheld based on IRS rules, state tax laws, and details you provide on Form W-4 (Employee’s Withholding Certificate).
Health insurance/Health insurance premiums/insurance costs: Money subtracted from pay for employee or family health coverage.
Retirement contributions/Retirement savings/employee contributions/employer contributions: Money put toward a workplace retirement plan, such as a 401(k).
Paid time off, sick leave, vacation leave: Paid, non-working time that may be shown as earnings or tracked for accrual.
Payroll system/payroll software/payroll service provider: The technology or third party managing payroll and issuing pay stubs or digital records.
Overtime rates/overtime pay/overtime work: Payment at 1.5 times the regular rate for hours worked over 40 in a workweek, as required by the Fair Labor Standards Act (FLSA).
State Disability Insurance (SDI): Required deductions in five states—California, Hawaii, New Jersey, New York, and Rhode Island—to fund disability benefits for employees.
Tax withholdings/paycheck records/payroll deductions: The broader category of all taxes and benefit costs taken from gross pay.

The pay stub definition might vary by employer, but most modern wage statements cover these essentials.

Why Pay Stubs Are Important for Employees and Employers

For employees, a pay stub is more than just a record—it’s proof of income, a snapshot of benefits, and a reality check for how much is actually earned after all deductions. Want to rent an apartment, apply for a loan, or verify employment? You’ll almost always need your paycheck stub or digital paystub.

From a budgeting perspective, clear pay statements help workers understand where their money goes—how much goes to Social Security, how much to retirement savings, and what’s paid to insurance. It’s a vital tool for financial literacy.

For employers, producing accurate payroll stubs protects the organization from wage disputes, supports compliance with state law, and satisfies the record-keeping requirements of the Fair Labor Standards Act (FLSA). While there is no federal law requiring pay stubs, most states have specific requirements for providing them to employees.

The FLSA requires employers to keep payroll records for at least three years, and records used for wage computations (like time cards) for at least two years. Additionally, the IRS requires employment tax records to be retained for at least four years.

Besides compliance, keeping detailed payroll records—including check stubs and wage statements—means less risk of IRS trouble, happier employees, and a smoother human resources process overall.

How to Read and Interpret Your Pay Stub

If you’ve ever skimmed a pay statement and wondered, “Where did all my money go?”, you’re not alone. Here’s how anyone can decode a pay stub example like a pro:

Start with the basics: Check your name, employee number, and the pay period to make sure the stub matches you and the right timespan.
Review hours worked: Confirm regular, overtime, and paid leave hours all look correct.
Spot the pay rate: Ensure the hourly rate or gross salary matches what you’ve been promised or what’s in your contract.
Examine gross pay: Is the math right, especially if there’s overtime pay or bonuses?
Scrutinize deductions: Federal, state, and local taxes, FICA taxes, retirement contributions, health insurance premiums—do these match your benefit elections and tax withholdings? Don’t forget employer and employee contributions to retirement or insurance.
Check net pay: This is what gets deposited—verify it aligns with what shows up in your bank account or payroll card.
Year-to-date columns: These help you spot patterns or errors, especially if you notice big jumps in deductions or unexpected changes.

Modern payroll systems and payroll service providers offer digital pay stubs, so it’s easier than ever to pull up past paycheck records in an online portal. If something isn’t clear, HR or the payroll department should be able to clarify.

What to Do If You Find an Error on Your Pay Stub

Mistakes happen, even with the most advanced payroll software or automated payroll platforms. Here’s what to do if you spot something off in your pay stub, digital record, or online portal:

Double-check the math: Compare hours worked, pay rate, and deductions. Sometimes incorrect data entry or benefit changes can throw off calculations.
Contact your employer quickly: Reach out to human resources or whoever manages payroll right away. Provide your payment stub, describe the mistake, and gather supporting documents (like a signed contract or timesheet).
Understand your rights: Most state laws require accurate payment of employee wages, and the Fair Labor Standards Act (FLSA) protects your right to proper overtime pay, minimum wage, and correct payroll deductions.
Keep your own records: Save digital pay stubs, paper wage statements, or paycheck images. Maintain copies for your records and future reference.
Formal complaint: If payroll errors aren’t resolved, you may file a formal complaint with your state labor board or the Department of Labor’s Wage and Hour Division. Keep a record of your communications and all paycheck stubs in case you need evidence.

Payroll records are your safety net—don’t hesitate to ask questions if anything on your pay slip looks odd. It’s your money and your right.