To read a pay stub, start at the top with your gross pay, follow the deductions and taxes taken out, and end with net pay, the amount you actually receive. Most stubs also show year-to-date totals, which help you check your records.
Layouts and terms differ between countries and employers, so this guide covers the common sections rather than one specific format.
Why it is worth reading
A pay stub, called a payslip in the UK and some other countries, is a record of how your pay was calculated. Checking it each period helps you catch errors, understand your benefits and plan your budget accurately. It is also useful evidence if you apply for a loan or rental.
How to read a pay stub: the main sections
| Section | What it shows | What to check |
|---|---|---|
| Employee and employer details | Your name, employer, pay period and pay date | Spelling and dates |
| Earnings | Hours, rate, salary, overtime, bonuses | Hours and rate match what you agreed |
| Gross pay | Total earned before deductions | Adds up correctly |
| Taxes | Income tax and social contributions | Amounts look consistent each period |
| Other deductions | Pension, health cover, union dues | You recognise each item |
| Net pay | What reaches your account | Matches the bank deposit |
| Year to date | Running totals for the tax year | Useful at filing time |
Gross pay versus net pay
Gross pay is the total you earn before anything is removed. Net pay, also called take-home pay, is what remains after taxes and other deductions. When you build a budget, use net pay, not gross, because that is the money you can spend. The 50/30/20 budget rule is explicitly based on after-tax income.
Understanding taxes and contributions
In the United States
Typical lines include federal income tax withholding, sometimes state and local tax, and FICA contributions, which fund Social Security and Medicare. Social Security is 6.2 per cent and Medicare is 1.45 per cent of eligible wages for employees, which is well-known, though other rules and limits apply. Withholding depends partly on the information in your withholding form.
In the United Kingdom
Payslips usually show income tax under PAYE, National Insurance contributions and your tax code. A tax code is a set of letters and numbers telling the employer how much tax-free pay to apply. If your code looks wrong, contact HMRC.
Pay frequency and hours
Employers pay weekly, fortnightly, twice a month or monthly, and the pay period on your stub tells you which applies. Annual salary divided by the number of pay periods gives the gross figure for each one. Hourly workers should compare hours listed with their own records, particularly where overtime or shift premiums apply.
Other common deductions
You may see pension or retirement contributions, health or dental premiums, student loan repayments, union dues or workplace savings schemes. Some are pre-tax, meaning they reduce taxable income, while others come out of net pay. If you do not recognise a deduction, ask your payroll or HR department to explain it.
A short checklist each pay period
- Confirm the pay period, hours and rate.
- Check that gross pay includes any overtime or bonus you expected.
- Look at each deduction and make sure you recognise it.
- Compare net pay with your bank deposit.
- Keep the stub, as year-end totals should match your records.
Using your pay stub in your wider finances
Your stub is the starting point for most money plans. Use net pay to set targets in saving for a goal, and keep the year-end figures with your paperwork, as described in tax season organization. If something looks wrong, raise it quickly with payroll, because errors are easier to fix when caught early. For more explainers, visit the finance archive.
This article is general educational information, not financial, tax or legal advice; please consult a qualified professional about your own situation.
Key takeaways
- Gross pay is before deductions; net pay is what you take home.
- Sections typically cover earnings, taxes, other deductions and year-to-date totals.
- Budget with net pay and check each stub for errors.
- Ask payroll about anything you do not understand.
Frequently asked questions
What is the difference between a pay stub and a payslip?
They are essentially the same document. Pay stub is the common US term, while payslip is more usual in the UK and elsewhere.
Why is my net pay lower than expected?
Taxes, social contributions and deductions such as pensions or health cover reduce gross pay. Check each line to see where the difference comes from.
How long should I keep pay stubs?
Many people keep them at least until they have reconciled the year-end summary with their records. Check local guidance for recommended periods.
What should I do if I find an error?
Tell your payroll or HR department promptly, with a note of what looks wrong. Keep copies of any correspondence until it is fixed.
Photo: EURO Cash Money Banknote by Markus Spiske from Forchheim, Bavaria Upper Franconia, CC BY 2.0, via Wikimedia Commons
