Pay Stubs: Everything You Need To Know

If you're an employee, you should receive a pay stub every time you get paid, either electronically or on paper. Understanding what's on your pay stub can help you get an idea of your income situation. It's also an essential document if you're planning on borrowing money.

Here's what you should know about what a pay stub is, when you'll need it, how to read it and more.

What Is A Pay Stub?

A pay stub is a document that shows the total amount of money an employee earns and their pay rate. It also details deductions taken from the employee's paycheck, including taxes, insurance and certain benefits.

Also known as a paycheck stub, a wage statement, or a payslip, pay stubs provide you with information for the most recent pay period, as well as the entire period for the year leading up to it.

When Will I Need A Pay Stub?

Reviewing your pay stub every pay period can help ensure that everything is correct. But there are situations where you'll need to provide it, specifically when you're applying for credit.

Personal Loan

If you're planning on taking out a personal loan, the lender will want to make sure that your income information is accurate.

Depending on the lender, though, requests can vary. For example, you may need to supply just your most recent pay stub or provide multiple months' worth of stubs. And if your credit is in great shape, for instance, you may not have to provide a pay stub at all.  

Auto Loan

An auto loan is a secured loan, so if you default on your payments, the lender can repossess the vehicle. That said, auto lenders still want to avoid that process if possible.

You'll typically need to share your annual income when you apply for an auto loan, and if your credit is less than stellar, you may also need to provide pay stubs to prove that you can afford the monthly payment.

Renting

In some cases, landlords may require that you prove your income if you're planning to rent a home, apartment or condo. Unlike major lenders, landlords typically don't have a wide portfolio of tenants to spread their risk. If you miss payments, it could cause significant problems for the landlord.

As such, you may need to provide multiple months' worth of pay stubs. If you just started a new job and don't have a track record for your current income level, the landlord may refuse to rent to you.

Taxes

Your final pay stub provides important information that you may need to file your taxes because it gives you the year-to-date numbers on earnings, taxes withheld, retirement contributions, and more.

That said, it's generally better to use your W-2 form because that's the information that your employer actually reports to the IRS. But you can use the pay stub to verify that the W-2 information is accurate.

Mortgages

A mortgage loan is a significant financial commitment, both for you and your lender. So if you're planning to purchase a home or refinance a mortgage, you'll need to provide evidence that you're employed, and you earn the income you claimed on your application.

Unlike other loan types, there's generally no way to get out of sharing this information for a mortgage, even if your credit history is perfect.

Compensation

If you've been in a car accident and can't work, you may qualify to receive compensation for your loss of income during the period that you're recovering. Your pay stub will show how much you earn, so the insurance carrier can calculate the amount you should receive.

What Do Pay Stubs Include?

While pay stubs can vary in the information they provide, here's what to expect if you're wondering what one looks like.

Employee Information

A pay stub should include information on both the employer and employee. That includes the company and employee's name, their addresses, and the employee's Social Security number (SSN). In some cases, your full SSN may be displayed, but many employers provide just the last four digits.

Gross Wages

You'll be able to see your gross wages for the most recent pay period, as well as year to date. This figure includes all of your wages before taxes and deductions, and it's the number you'll provide when you apply for credit, a lease, or insurance compensation.

Taxes

Every time you get paid, your employer will withhold various taxes from your paycheck. That includes federal income taxes and state income taxes — unless you live in a state that doesn't have an income tax. Your withholdings are based on the exemptions you chose when you filled out your W-4 form.

You'll also see FICA taxes, which include the Social Security tax and Medicare tax. These are flat taxes of 6.2% and 1.45%, respectively.

Additional Deductions

Depending on the situation, you may have other deductions that your employer takes from your gross wages. That can include insurance premiums, retirement contributions, Health Savings Account or Flexible Spending Account contributions, charitable donations and more.

Net Pay

Your net pay is what you take home after all of the taxes and deductions are withheld from your gross pay. This is the amount that is direct deposited into your bank account or issued to you as a paper check.

How Do I Get My Pay Stub?

Depending on how your employer pays you, there are different ways you may receive your pay stub.

Some employers, for instance, may provide a paper pay stub, even if they pay you electronically. Others may simply upload your pay stub to an online portal, where you can view it by logging in to your account. If you're unsure about how to get pay stubs, contact your payroll manager.

How Long Should I Keep My Pay Stubs?

Once you receive your W-2 for the year and begin filing your taxes, you generally don't need to hold onto your pay stubs anymore. That said, it may still be a good idea to hold onto at least an electronic copy just in case you need it. Check with your employer to see how long they keep your pay stubs in their system and consider downloading a copy for your own records.

The Bottom Line: A Pay Stub Shows Where All Your Money Goes

A pay stub not only shows you how much money you earn but also where some of it goes before you receive your check or direct deposit. While you'll typically share your gross wages when you apply for credit or an apartment lease, calculating your net income can help you establish your monthly budget and tell you whether you need to adjust some deductions to increase your net pay.