What Is a Pay Stub? Definition, Example and What It Must Show

If you have ever looked at a paycheck and wondered where a third of it went, the pay stub is the document that answers. It is short, it follows a predictable layout, and once you can read one you can read them all. This post defines the term, walks through an example and explains how a pay stub relates to the other payroll documents you will meet.

Definition

A pay stub is the itemized statement that accompanies an employee's wages for one pay period. It shows how the employer got from the gross amount earned to the net amount paid. Other names for the same document: pay statement, earnings statement, wage statement, check stub, pay slip (common outside the US) and, in some state laws, "itemized statement of deductions". When wages are paid by direct deposit, the stub is often delivered electronically through a payroll portal or by email.

What a pay stub shows

Layouts vary, but a complete pay stub contains these sections:

• Header: employer name and address, employee name and address (and often an employee ID), the pay period start and end dates and the pay date.
• Earnings: each type of pay on its own line (regular, overtime, bonus, commission, holiday, sick, PTO), with hours and rate where they apply, a current amount and a year-to-date amount. The total is gross pay.
• Taxes: federal income tax, Social Security (6.2%), Medicare (1.45%), state income tax where the state has one, and any local or state program contributions (city tax, disability insurance, paid family leave).
• Deductions: amounts the employee chose or owes: retirement contributions, health premiums, garnishments, union dues, charitable gifts, loan repayments. Pre-tax and after-tax deductions are usually grouped separately.
• Net pay: gross pay minus taxes minus deductions; the amount actually paid.
• Year-to-date (YTD) totals: a running sum for every line since January 1.

Some stubs add a block for employer-paid items (the employer's share of Social Security and Medicare, health insurance paid by the company) for information only, a balance of accrued vacation or sick time, and the payment method (check number or the last digits of the deposit account).

An example

Suppose Maria earns $25 an hour and is paid every two weeks. In one period she works 80 regular hours and 3 overtime hours at $37.50, so gross pay is $2,000 + $112.50 = $2,112.50. She contributes 5% of pay to a 401(k) ($105.63, pre-tax) and pays $60 toward a Section 125 health plan (pre-tax). Her stub then shows federal income tax figured on the reduced taxable wages, Social Security of 6.2% and Medicare of 1.45% (both figured on wages after the health premium but before the 401(k)), state income tax if she lives in a state that has one, and net pay at the bottom. Each line also shows the year-to-date figure, so by December the YTD column equals what appears on her W-2.

Walk through a real one line by line in How to read a pay stub, and see the flow from gross to net in Gross pay vs net pay.

Who issues pay stubs, and who must

The employer issues the pay stub, or the payroll service does it on the employer's behalf. Federal law (the Fair Labor Standards Act) requires employers to keep accurate records of hours and wages, but does not require them to give employees a statement. State law fills the gap: most states require a written or electronic pay statement with each payment and list what it must contain; a few are silent. Our post on which states require pay stubs has the details, and the state pages cover each state's taxes and rules.

Pay stub vs paycheck vs W-2

• A paycheck is the payment itself (a paper check or a direct deposit). The pay stub explains it.
• A Form W-2 is the annual summary the employer files with the Social Security Administration and gives the employee by January 31: total wages, total withholding and benefits for the year. The December pay stub's YTD column should match it.
• A Form 1099-NEC is the annual statement for an independent contractor, who is not an employee and has no taxes withheld. Contractors can still receive a payment statement; see W-2 vs 1099 pay stubs.

Why pay stubs matter

For the employee, the stub is the way to check that hours, rates, overtime and withholding are right, and the record to bring to the employer if they are not. For the employer, it is evidence that wages were calculated and paid correctly, which matters in a wage dispute, a state labor audit or an IRS inquiry. Employers should keep pay stubs or equivalent records for at least the retention periods in Pay stubs for small businesses; employees should keep theirs at least until the W-2 arrives and matches.

Where small employers get pay stubs

Payroll services produce stubs automatically as part of running payroll. Employers who pay staff directly, bookkeepers handling several small clients and household employers often use a pay stub generator instead: they enter the earnings and deductions, the tool applies the current federal and state tables and produces a PDF with YTD totals. On PayStubNest the preview is free and a finished pay stub costs $1. Whichever route you take, the figures on the stub must come from the actual hours, rate and payment; the document records payroll, it does not replace it.