Have you looked at your pay stub recently?
Most people don’t because about 82% of them get paid through direct deposit. It shouldn’t stop you from understanding your paycheck. It’s a guide to how much you pay in taxes and what your employee contributions are.
There could be errors on your pay stub that can lead to less money in your bank account, too. Read on to learn the top 5 tips to read your pay stub and find out how to minimize errors.
1. Compare the Gross Pay and Net Pay
The first thing you’ll notice is that there is a big difference between the money you earn (gross pay) and the money that’s deposited (net pay). You need to pay federal, state, local taxes.
There are also retirement contributions and health care premiums that are deducted. You may have more taxes and contributions.
2. Understand Taxes
Do you know how much you pay in taxes? Your pay stub will tell you. The amount of federal taxes withheld may be more or less than necessary, which could lead to a big refund or tax bill in April.
You also have 7.65% withheld for Social Security and Medicare contributions. You may have additional state and local taxes, depending on where you live.
3. Look for Employee Contributions
Additional deductions are for employee contributions to benefits. For example, your health insurance isn’t paid for entirely by your company.
Insurance premiums are expensive, and employers will split the cost with employees. Employees could pay as little as 10% or as much as half. This is something you need to ask your HR department to make sure the deductions are accurate.
4. Check Pay Stub Accuracy
There is a good chance that there are errors on your pay stub. Pay stubs are usually generated by people, and they can make mistakes. You could also have underreported the number of hours worked.
Both instances can lead to less money in your bank account. You want to keep a written record of your hours worked for yourself. You can see what your deductions are supposed to be using a fake pay stub template.
These methods are to protect you from getting underpaid. Be sure to check your pay stubs every payday. The longer you wait to check, the harder it will be to fix.
5. Report Any Errors
What happens if you spot mistakes in your paycheck? You need to report the mistakes right away to your HR manager or direct supervisor. You’ll need to prove the errors, which is why it’s important to maintain your own records.
If you were underpaid, the HR manager is likely to fix the issue and reflect additional earnings on your next paycheck. If the issue is ignored then you may have to report it to your state’s department of labor.
Understanding Your Pay Stub
Do you want to be in control of your finances? It starts with understanding your pay stub. Once you know what’s in your pay stub, you can start to take control of your financial situation.
You know exactly how much money you earn, how much is paid in taxes, and what your benefits package really is. It makes it easier to compare jobs and anticipate how much you may get in your tax refund.
For more great tips, be sure to check out the Consumer Resources section of this site.