Understanding Your Pay Stub
A good number of employees rarely understand why the money earned is not always 100% of the amount that an employer promises. This is simply because they do not take time to examine their pay stub. An employee’s pay stub is simply a part of the paycheck. The pay stub contains a lot of details about the salary received. Some of the details include:
The two categories of pay found on a paycheck
Gross pay
This is the initial amount earned by an employee prior to implementation of deductions by an employer.
Net pay
This is the amount that an employee is left with after all the necessary deductions have been made.
The deductions made from a paycheck
Medicare deduction
It is meant to serve Medicare insurance needs of an employee. It is computed as 1.45% of employees’ paycheck. The employer also aids the employee in addressing this deduction by contributing 1.45%.
Federal Insurance Contributions Act (FICA) or Social security tax
This tax is levied to guarantee employees of monthly social security payment when they retire. For this to be realized, employees must be deducted 6.2% from their paycheck. The employer is also mandated to pay 6.2% to facilitate the social security of the employee.
Life insurance deductions
In some cases, the employer may furnish the employee with a life insurance policy. In such an occurrence, the employee may be required to pay a certain amount from the annual salary to keep the policy operational.
Federal tax (FIT tax or Fed TX)
This is the tax that an employee owes the federal government.
State tax (SIT or St TX)
This is the amount imposed on employees by some states. It is deducted from the paycheck.
Local tax
It is not a common type of tax but it imposed on employees residing in certain regions or counties.
Year to date
This section of the paycheck indicates the amount paid for various deductions at any time of the year.
Other deductions include:
Miscellaneous deductions
They take the form of union dues, charitable deductions and other stated mandated deductions.
Leave duration
The paycheck might also include details concerning sick and vacation leave that an employee is entitled to. Information about the number of time each kind of leave has been utilized is also indicated and the remaining duration.
Finally, employees need to make efforts to comprehend all the information shown on their paycheck. The information is necessary in helping them understand how their net pay is arrived at, how they will budget for it and the benefits they are exposed to as a result of paying for the deductions.
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