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What is a Paystub? Everything You Need to Know About Your Paycheck

Did you know that almost 80% of Americans live from paycheck to paycheck?

This is also a pretty common occurrence worldwide, so if you’re an employee and you want to learn more about how you can make your money go further or you just want to learn more about your finances then we have the guide for you.

Keep reading to find out what is a paystub and how to understand your weekly or monthly paycheck.

What Is a Paycheck?

According to the Pew Research Center, over 157 million Americans are part of the U.S. workforce. If you’re employed, whether it is part-time or full-time, you’ll probably receive a paycheck.

A paycheck is issued by your employer to compensate you for your service and the hours you’ve worked. Some paychecks are issued weekly, every two weeks, or every month.

Your paycheck should tell you how much you’ve earned and for which week/month. It will also have other details on it which are known as paystubs.

What Is a Paystub?

Whether you’re an employer or an employee it is very important that you understand everything about paystubs. So, what is a pay stub and what does it matter to you?

Pay stubs, payslips, or earnings statements, are information on your paycheck that shows you all about your pay from your employer. You’ll be able to find the wages you’ve earned for the pay period and also the year-to-date payroll. The information on your pay stub should also include deductions and taxes that have been taken from your paycheck.

After your paystub has detailed the above, you should also be able to find your net pay, which is how much money you actually receive.

What does a pay stub look like? Your paycheck will either be available electronically or you’ll receive a paper copy of it. Here, you’ll find your personal information, how much you’ve earned, how many hours you worked, and how much net pay you received.

Why Are Pay Stubs Important for Both Parties?

Paystubs are important for you as an employee because you can make sure that you’re receiving the right amount of money each paycheck and that you aren’t paying for taxes and deductions that don’t apply to you.

Paystubs are important for employers because they can keep payroll records to help settle discrepancies with employee pay. Employers might also need to use the information on an employee’s paystub when they are completing tax forms for the business.

What Information Can You Find on Your Paystub?

Every organization and business operates differently, so some paystubs might have different benefits and deductions to others. However, generally, your paystub should include the following information on it:

  1. The starting and ending date of the pay period (weekly, every two weeks, monthly)
  2. Your gross pay (which is the amount of money you were paid, before your employer took deductions out of it)
  3. Your net pay (which is how much money your receive after your employer deducts money from your paycheck, for example, tax deductions)
  4. Local taxes withheld (if any, however, many local areas don’t charge these taxes)
  5. State taxes withheld
  6. Federal taxes withheld
  7. Insurance deductions
  8. Social security deductions
  9. Medicare deductions
  10. Your contributions towards your pension or 401(k) plan
  11. And any wage garnishments.

Many paystubs will also include information about your year-to-date gross earnings, net wages, and deductions.

What Do the Deductions Mean?

Understanding your paychecks deductions can be very confusing. If you’ve ever looked at your paystub, it can be very upsetting to see a big chunk of the money that you’ve earned go out before you even get it. Have a look at our guide to help you understand some of the key deductions.

Federal Taxes

For every paycheck you earn, the government will take a percentage of your earnings. This percentage of income is your withholding tax (which is a partial payment of your annual income taxes, this gets directly sent to the government.

The amount of money you pay towards federal taxes depends on how much money you earn and also on the information you provided your employer.

This information should have been provided when you filled out your W-4 form. Your W-4 form allows you to make allowances for yourself, children, or spouse. The more allowances you have, the less money gets taken from your paycheck and given to federal taxes.

State Taxes

You might have to pay state taxes, depending on whereabouts you live in the United States. Similar to federal taxes, this money will come directly out of your paycheck before you see it.

You might also be subjected to paying local taxes, however, not many employees are. Again, this depends on where you live. Make sure you check out the information for your local area and that you are aware of any taxes that come out of your paycheck.

Social Security Deductions

Your paycheck will include a contribution of your total earnings going towards social security. The federal government requires every working American to contribute some money from their paycheck to this. Social security is a system of supplementary retirement programs.

Every worker contributes 6.2% of their gross income into the social security fund. Their employer matches this percentage and also contributes 6.2% for each employee.

Medicare Deductions

The U.S. government also requires every working American to contribute to Medicare. Medicare is a U.S. government insurance plan that provides hospital, medical and surgical benefits for American citizens 65 and older and for people with disabilities.

Similar to social security deductions, medicare deductions work by taking a contribution from the employee’s gross income (1.45%) and their employer will also contribute that much for each employee.


Some employers might have insurance plans that you can sign up for when you start working at the company. If you’ve signed up for medical, dental, or life insurance through your employer then these deductions will be taken from your paycheck too.

Retirement Plans

Some employers will also take money from your paycheck, this money will go towards your retirement savings plan. For example, when you sign up for a 401K plan, you get to choose how much of your pre-tax salary you want to contribute to your retirement account.

Tax Deduction Codes and What They Mean

Your paycheck will only be small, so to fit everything on you can expect to see the deductions written in codes.

Most people know that 401K stands for retirement savings contributions and that 401L ER refers to your employer’s contributions. However, there are some codes that you might not have heard of before and that might be because some companies do it differently. For example, health insurance might be listed as HS for some companies, while others list it as HI.

Other examples of codes that might vary from company to company include saving funds, pensions, and unions. All of these might not apply to your current paycheck, but it’s always good to know what they mean.

If you see Gross pay written on your paystubs, this means the amount of money you earned during the pay period, whether that is weekly, every two weeks, or monthly.

The codes FED / FIT / FITW mean the federal income tax that you pay.

The codes STATE / SIT / SITW mean the state in which you earned the money,

The codes OASDI / FICA / SS / SOCSEC mean the social security tax that you pay.

The code MED stands for the medicare tax that you pay.

The codes FSA / HSA stand for your flexible spending account and health savings account.

401(k) this means how much money you’re putting into your company’s retirement account.

Net pay is the overall amount of money you receive after deductions have come out.

The code GARN means any wage garnishments.

The code CHSPPRT means any child support payments you get.

And finally, LV / LEVY means any tax levies that you’re entitled to.

If you’re an employer, it is very important that you give your employees their paystubs. There’s a range of software and programs available that you can use such as paystub maker. Start creating your employee’s paystubs now by filling out the information, downloading the stubs, and printing them off.

Follow Our Guide on Pay Stubs and Learn More About Your Money

Whether you’re an employee or an employee, it is very important to learn about your money. Follow our guide that answers your vital questions, such as what is a paystub, what information is included on a paystub, and what do the deductions mean.

Employee’s who don’t fully understand their paystubs should ask their employers about any information they want clarifying. While employers who aren’t sure about their employee’s paystubs should contact a qualified accountant.

If you found this article insightful, then make sure you check out some of our other business-related articles.

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