How do you feel the heel of your salary | personal financing
All too often, Jenny Reedus gets a call from an employee who recently discovered his pay stub. They usually have questions about what all the different numbers mean, and the HR professional says that’s understandable.
“It’s a lot of information,” says Redes, an HR manager and Certified Professional of the Association for Human Resource Management with Manufacturer Custom Profile in Walker, Michigan.
Decoding your pay stub is an important skill that ensures you are compensated correctly and have the information you need to create a budget. Keep reading for a summary of everything you might find in your pay stub and what it all means.
Does the employer have to provide a salary stub?
First, it should be noted that there is no federal law requiring that payroll slips be distributed to employees. “It depends on the state (you),” says Erica Fine, director of human resources at the Miami law firm Shutts & Bowen LLP.
In a few states, such as Ohio and Georgia, there is no requirement for employers to provide workers with salary slips or wage data. However, the vast majority of states require employers to provide employees with access to the pay stub, either electronically or as a physical copy. Eleven states require written or printed payment statements.
To determine the legal requirements in your area, check with your state’s Department of Labor or its equivalent agency.
The main components of the payment element
Regardless of its format, your payment statement may contain a combination of information required by state law and voluntary details included by your employer. Here’s a look at the most common information available on pay slips.
Not surprisingly, wages are a key piece of information on payroll slips. Workers may find their hourly wage or salary along with details of their gross and taxable wages and net wages. Payment data may include both the payment period and payout details to date.
While everything in your pay stub deserves your attention, be especially careful when reviewing wage information. “One of the most common mistakes that can occur in the payroll process is when an employee is paid at a higher or lower than normal pay rate,” says Tim Speiss, partner in the practice of personal wealth advisors for accounting firm EisnerAmper LLP. .
Tax deductions are another mainstay in payment statements. For most employees, these will include federal, state, and local income taxes as well as the FICA Medicare and Social Security tax.
According to Fine, it’s not uncommon for younger employees to see Medicare mention in their pay stub and do double work. “They… say, ‘You don’t need Medicare,'” she explains. However, Medicare and Social Security taxes are paid into the program to support those who are currently receiving benefits.
Workers also need to realize that they may not pay taxes on everything they earn. “Taxable income is different from gross salary,” Reds says. That’s because some deductions — such as contributions to traditional 401(k) accounts — are made with pre-tax dollars. “(It can) be very confusing,” Redis notes.
When reviewing your pay stub, be sure to withhold the correct amounts at each level. Pay close attention to local income tax if your business has multiple locations but local tax is assessed only in certain areas.
Many companies want their workers to know how much they are paying on behalf of employees for perks like insurance and retirement contributions. These expenses may be listed as separate items. Workers may also find details such as their available paid time off.
Pay slips may also reflect discounts for items such as parking permits, voluntary insurance benefits, contributions to retirement plans, and health savings accounts.
For the most part, these deductions can only be made if you allow, Fine says. This means that if you don’t recognize a specific expense, it’s time to contact your HR department to confirm their purpose and whether you’ve approved them.
Other items in your pay stub may be unique to your employer.
“There are things we put in our area that are important to our employees,” Redes says. It includes items such as the employee’s appointment date and attendance points. These items are not required by law, but companies do list them because they are details that many workers want to keep track of.
Why you should review your salary stub
As long as the amount deposited into your bank account appears correct in each payment period, you may be wondering why your payment statement should be reviewed. HR and finance experts say there are at least three reasons to do so.
The first is to make sure your salary rate and withholding taxes and deductions are correct. “Mistakes happen,” Redis says. Identifying and quickly correcting these errors is much easier than trying to fix a problem that is left in place, such as withholding the wrong tax amount for months.
Next, looking at your pay stub provides a way to better understand how government decisions, such as those about tax policy and mandatory benefits, affect workers. “When you go out and vote, these decisions may have a direct impact on you,” says Fine.
Finally, salary stub information can be vital to proper budgeting. Without the information on your pay stub, you might make the mistake of planning expenses based on your hourly wage or base salary. “That’s not how much you should actually live,” says Fine. Alternatively, a large amount of your income may be transferred to taxes and other deductions.
On top of that, your pay stub provides information that can be important to your long-term financial stability, says Speiss. It encourages people to think about how much they are putting aside for needs like retirement and to discuss with an investment advisor how to get the most out of that money.