Trying to make sense of your pay stub might feel like deciphering a secret code. Words like “hours worked” are simple enough to figure out. But when you see deductions labeled with abbreviations like MED/EE, YTD, and FICA, it’s all a little more difficult to understand.
Here’s the good news: You don’t need a degree in finance to crack the code. And once you learn how to read a pay stub, you’ll know exactly where every dime you earn is going.
What is a pay stub, anyway?
The term “pay stub” is a holdover from the days of paper paychecks. Before
direct deposit changed the way employees got paid, people received physical paychecks attached to a detachable “stub” that provided a detailed breakdown of their earnings, taxes, and deductions.
While paper checks still exist, electronic payments are far more common. Still, the name stuck. When you hear “pay stub” today, it’s usually just referring to a snapshot of what your employer paid you during this
pay period. And maybe more importantly, your pay stub is where to find out exactly what’s being deducted before your wages hit your account.
The anatomy of a pay stub
If you’ve worked for more than one employer, you might know that the details included alongside your paycheck are sometimes presented in slightly different ways. But while there might be some variations in what’s available on pay stubs, certain important information is always there.
Here’s a breakdown of the essential elements:
Gross pay. This refers to your total earnings before anything is taken out. Gross pay includes your base pay, plus any bonuses or overtime.
Net pay. Also called “take-home pay” or just “home pay,” net pay is what’s left after subtracting all deductions — the amount that gets deposited into your bank account.
Deductions. Speaking of deductions, you’ll see plenty of those. Common pay stub deductions and taxes include:
Health insurance. If you’re enrolled in an insurance plan through work, you’ll see your monthly premiums deducted here.
401(k) contributions. Contributing to a retirement fund means less spending money today, but you’ll be glad you did it when it’s time to retire.
YTD totals. YTD stands for “year-to-date.” This number shows you how much you’ve earned or had deducted so far this year.
Pay period. Here you’ll see the dates for the current pay period, which usually ends about one week before you actually get paid.
Pay date. Unlike the pay period, which is the range of dates you’re getting paid for, the pay date is the date the check was issued or deposited into your account.
Hours worked. If you’re an hourly employee, this detail will show you how many regular hours you worked during the pay period, plus how much overtime (if any).
How to read your pay stub in 6 steps
Navigating your pay stub might feel like a maze at first, but knowing what each section means furthers your journey toward
financial freedom. Here’s a step-by-step guide to finding all the info you need.
1. Find the pay period and pay date
Start at the top of your pay stub. The pay date is the day your employer issued your check. The pay period indicates the range of dates this paycheck covers, whether it’s a single week, two weeks, or a month. Double-check that the pay period aligns with your schedule.
If you’re paid hourly, checking this detail helps make sure you were paid for every shift or hour worked.
2. Look at your gross pay
Your gross pay is your total earnings before anything is taken out. It includes your base pay, along with any overtime, bonuses, or commissions.
If you’re hourly, gross pay is calculated by multiplying your hours worked by your hourly pay rate. For salaried employees, it’s a fixed amount every pay period, unless bonuses or additional compensation are getting added in.
3. Review your hours worked
If you’re paid hourly, find the section that shows the number of hours worked. Look for categories like “regular,” “overtime,” “
holiday pay,” or “PTO” to make sure everything is correct. If you worked extra hours or took time off, this section should reflect those adjustments. Any discrepancies here affect your total earnings, so contact the payroll department if something looks off.
4. Review your deductions
Deductions include taxes, benefits, and other contributions that get subtracted from your gross pay. Federal and state taxes (often labeled FED and SIT) are mandatory, as are Social Security and Medicare (combined as FICA). You might also see deductions for health insurance, retirement accounts like a 401(k), or even wage garnishments. Each deduction serves a specific purpose, so if you’re ever unsure, don’t hesitate to ask your HR or payroll team.
5. Find your net pay
This is the part you’re probably already pretty familiar with — the spot that tells you how much money you’re actually taking home. Net pay is what’s deposited into your bank account via direct deposit (unless you still receive a paper check). If this number doesn’t match what you expected, revisit the deductions section to see what might have changed, and double-check that all of your hours are recorded.
6. Check your year-to-date (YTD) totals
Look for a column or section labeled “YTD.” This is a running total of your earnings and deductions for the year so far. It’s especially useful when planning your taxes or tracking how much you’ve contributed to benefits like health insurance or retirement.
7. Verify any additional information
Finally, check for details like your employee ID, accrued paid time off (PTO), or any other details or benefits. This information might not directly affect your pay, but it’s good to monitor for accuracy.
Frequently asked questions
What does a pay stub look like if the paycheck is delivered via direct deposit?
Digital pay stubs are the modern-day equivalent of the paper versions many people are familiar with. Instead of a physical slip of paper, they’re typically presented through an online payroll portal or sent via email.
How can I use my pay stub as proof of income?
Pay stubs are one of the most common forms of
proof of income — the documentation you’ll often need to show when applying for things like rent, loans, or other financial obligations. Your pay stub is a great form of proof because it shows your gross pay, net pay, and deductions, along with your year-to-date (YTD) earnings.
Why is so much of my paycheck withheld for FICA taxes?
FICA taxes, which stand for the Federal Insurance Contributions Act, are payroll taxes required by the federal government. FICA taxes fund Social Security and Medicare programs. Both you and your employer share the responsibility for paying FICA taxes, with each of you contributing
6.2% for Social Security and 1.45% for Medicare.
Make the most of your paycheck with EarnIn
Knowing how to read your pay stub isn’t just about tracking your earnings — it’s about taking control of your financial well-being. By understanding your gross pay, deductions, and take-home pay, you can make more informed decisions about your money.
Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
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