PAYCHECK VS. PAY STUB

Yes, there is. A paycheck is a physical check, while a pay stub is a document that summarizes the amounts in a paycheck. As direct deposit is becoming more common, an employee is more likely to receive an email with a link to pay stub details versus a paper check.

While there’s no specific format set in stone, there’s some standard information that’s included no matter how a pay stub is designed.

Some of the most basic details include:

• Employer and employee addresses — both of which should be up-to-date and accurate.

• The pay date — the date the paycheck is issued.

• Pay period — the dates that the paycheck covers.

• Pay rate — how much the individual is being paid per hour (hourly rate) or per year (annual salary).

This is really the crux of why a pay stub is provided to employees. Total pay is the amount of the paycheck before any taxes or other deductions are taken out or any contributions are added. Net pay is the final amount that the employee takes home.

The verb deduce means to subtract or take away. Income tax is the deduction that everyone is most familiar with. As part of issuing payroll, employers (businesses) have to take out (withhold) a percentage of each employee’s taxable pay. This is done every time payroll is run.

Remember wondering who FICA was?

FICA is actually the Federal Insurance Contributions Act, which is also responsible for two other deductions — Medicare and Social Security.

In payroll speak, things like income tax, Medicare, and Social Security are called payroll taxes (employment taxes). Other deductions can include state and local income taxes, employee 401K contributions, insurance payments, profit sharing, union dues, and garnishments. (In Alaska, New Jersey and Pennsylvania, employees also have deductions for state unemployment insurance).

To contribute means to add. When it comes to payroll, employees aren’t the only ones who have to pay taxes. Employers also contribute to Social Security and Medicare. Plus, they’re also responsible for unemployment insurance on a federal and state level.

Other contributions may also include other income, like overtime, tips, bonuses, commissions, expenses or paid time off like sick, personal, or vacation time. All of the income types are considered taxable (subject to income and or payroll taxes like Medicare and Social Security).

Depending on how a pay stub is formatted, you may see figures for total and year-to-date amounts. When you see these figures, the total is the total amount of the paycheck and yearto-day is the total since the start of the fiscal year for your payroll.

There are many different types of expenses. Review the chart below to learn more about fixed expenses, variable expenses and occasional expenses and brainstorm examples for each type.

Expenses that cost the same amount each month. These bills cannot be changed and are usually paid on a regular basis (monthly, weekly or yearly).

Examples: • Rent • Car payment • Mortgage

Expenses that vary from period to period. These bills can be more easily changed or altered depending on use and needs.

Examples: • Utilities (water, gas, electric) • Groceries • Automobile gas

Like fixed expenses, these bills generally cannot be easily changed; but, they do not occur on a regular weekly or monthly basis, making them more challenging to plan for.

Examples: • New seasonal clothing • Home maintenance • Car maintenance