A Detailed Look at your Paystub: What all does it include?
If you are a working professional, your company likely issues payment records in each pay period. These documents are called paystubs, checkstubs, or payslips. The Fair Labor Standards Act (FLSA) does not mandate companies to share checkstubs. However, employers have to track your work hours and income every month. So, even if you do not receive a written or printed record, you can request it from your employer. Many paystub generator free options are now available, so more convenient than before.
A paystub is a document breaking down your income and letting you show proof of your earnings to loan agencies, property dealers, credit card companies, etc. Having all your payment information allows you to budget more efficiently. It also helps maintain transparency with your employer.
Here, we understand the various sections of a typical checkstub to get started on a well-informed, balanced journey into personal finance.
Components of a Standard Paystub
Here are the sections you can find in your payslips in each payment period. It is a financially smart move to assess your records month on month to weed out any discrepancies. It also allows you to understand where your money is going, especially why the amount that comes in your bank is lower than promised on your letter of employment!
1. Contact information
This component of your monthly paystub shows your contact info and details of the company for which you work. Typically, this covers your name, address, and social security number. The name and address and of your office area are also in there.
2. Your gross income
A vital section of your checkstub is the gross payment you receive as detailed in your employment contract. It refers to your total income before any deductions for taxes, insurance premiums, etc., are made. Besides this figure, employers also include details like your pay rate, overtime pay, and payment for times you were sick or on holiday. If you get paid by the hour, the number of hours you worked in the last pay period will be in the paystub. These details, however, are liable to change across states.
3. Your net income
It reflects your take-home income or the money that gets deposited in your bank account. Your employer calculates this by reducing the deductions for federal taxes, retirement contributions, etc., from your gross income. Using financial software or a free check stub maker can simplify this calculation and cut time and effort.
4. Social Security and Medicare contributions (FICA)
Under the Federal Insurance Contributions Act (FICA), a portion of your salary gets deducted toward Social Security and Medicare plans. As of 2021, the tax rate for Social Security is 6.2%, and the Medicare deduction is 1.45%. The percentage keeps changing, so you should evaluate this section carefully to ensure you are on the same page as the payroll department.
5. Deductions for insurance
Depending on how many insurance covers you have, this section is significant. Here, you can see how much money gets deducted from your salary toward the payments for medical covers, disability plans, etc. It gives you a clear picture of where your monthly income is going and also reassures you that you are safe in case of exigencies.
6. Contributions made by your employer
Your paystub details the contributions your company makes toward Social Security and Medicare. As a rule, your employer must match your contributions – so, your company will also give 6.2% for FICA tax. On your payslip, you can find the amounts that the employer has contributed in the last pay period as well as year-to-date.
7. Payment toward retirement plan
Here is another reassuring section of your paystub: the contribution toward retirement plans. Many employers offer such schemes for their workforce through a 401(k) plan. While it will show up as a deduction at this stage, it is comforting to know you have a retirement sum to fall back on in your later years. Many finance experts suggest that you set aside 15% or more of your annual income for your retirement.
8. Deductions for employee debts
If you have any debt with your employer, the requisite information will show up on your checkstub. Your company will deduct the sum to pay off your debts towards needs like bill payments or childcare. It is a non-permanent section of your paystub and is not present for all employees.
Many companies now use a paystub online that permits employees to view their records whenever they like. If your workplace does not issue payment records, you can feel free to take it up with your HR department.
Paystubs are indispensable tools for financial management, permitting you to take an in-depth look at your income and plan your future investments. If the payroll or HR departments make an error in your salary processing, your checkstub will provide the most clarity to address it.
Multiple options now exist for contractors and freelancers too. You can use an online paystub generator like StubCheck.com to build your checkstubs with all the required information and minimal risk of errors.