One of the essential things you need to know in life that they never teach you in school is how to read a pay stub. When it comes to your income, your taxes, your health insurance, and your financial planning, you need to be able to read a pay stub. Your pay stub may be given to you via an online platform or from your employer in the mail.
You may be a small business owner or freelancer that needs to generate their own pay stub with an online platform. If you are employed by a company, they are most likely legally required to send you a pay stub with all of the necessary information on it. Once you have this, reading a pay stub is much easier than it might seem at first. Read on to find out exactly how to make sense of your pay stub.
1. Identifying Information
The first thing that you need to know about understanding a paystub is identifying information. Most of this will usually be printed at the top of the pay stub, prior to any information about your earnings and deductions. In any good pay stub example, your identifying information will be very prominent and easy to read. This should always include:
- Your full name
- Your social security number
- The name of your employer
- Your address
- The address of the company you work for
- Your employee ID
If you have all of this information, then you have a valid pay stub that you can use for a variety of purposes, such as filing your taxes or applying for a loan or mortgage.
2. Pay Information
Next up is your payment information, which is of course the most important part. This is the information detailing how much you earn, how you are paid, where your salary goes, and what you are actually being paid for. This will be located in the central part of the pay stub and will take up most of the space on the document. Here is what you need to look out for:
- The pay period: this is the date range for which you are being paid (i.e. 1-14 January 2021)
- The pay type: how your salary is actually calculated (i.e. you are paid hourly or on a weekly basis)
- The pay date: the date you receive your check or direct deposit (this is usually every second Friday)
- Hours worked: the amount of paid hours you have worked in the pay period
- Gross Pay: the total amount of money earned before deductions
If you are a freelancer or business owner that needs to calculate this yourself, you can easily check stub examples and create your own via an online pay stub generator.
3. Deduction Information
Have you ever noticed that the money you have earned is always much more than the amount that lands in your bank account? This is because of deductions. All of these will be listed on your pay stub and will include:
- Taxes: all of the federal, local, and state taxes to be taken from your gross salary
- Employer contributions: these are your required or agreed contributions to things like your retirement fund or healthcare plan
- Expenses: any money deducted for on-the-job expenses, for example, if you must purchase your own uniform at work
Enhance Your Knowledge for Better Business Now that you know how to read a pay stub, you can move towards making better business decisions in your future. For guides on how to run your own business and be your boss, we have got you covered. Make sure to check out our Business section for all of the latest advice and information on running a business in 2021.
