Ah, payday. We all look forward to it. But what’s the difference between a paycheck and a pay stub. We break it down for you.
What’s on a Paycheck?
For starters, a paycheck is a physical (paper) check made out to the employee for the amount to be paid based on their salary or hours worked. Approximately 4% of workers still receive a paper paycheck. This is an outdated way of paying employees – as most businesses today (both large and small) pay employees through an automated payroll platform, like Fingercheck.
What’s on a Pay Stub?
A pay stub, on the other hand, summarizes all the amounts contained within a paycheck. Employees paid via direct deposit will receive an electronic pay stub. Roughly 82% of employees today use an online portal to access pay stubs.
Details on a pay stub include:
- Employer and employee addresses — Each should be up-to-date and accurate.
- 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 or per year.
Also found on a pay stub is an employee’s total pay or gross pay and their net pay final pay for a breakdown of the differences between gross pay and net pay, click here.
All employee information must be kept current – including first and last name, address, city, state, and zip code. Any inconsistencies or incorrect data will cause delays in getting your paycheck and confusion come tax time. It will also cause delays in bank approvals and direct deposits.
What is FICA?
FICA is a U.S. federal payroll tax and is short for Federal Insurance Contributions Act. It’s deducted from each paycheck. Your nine-digit social security number helps Social Security accurately record your covered wages or self-employment. Throughout your time working, from your very first to your last paycheck, you pay FICA taxes. This earns you credits for social security benefits you can access when you retire.
How to Read Your Pay Stub
A chunk of everyone’s paycheck is taken for various deductions/withholdings and contributions that are listed on your pay stub. It’s important to know how to read and understand why these are listed and taken from your gross pay. Below are the main items to know (and understand) on your pay stub.
- Deductions are the amounts subtracted or withheld from the total pay, including the income tax percentage of an employee’s gross wages.
- Social security and Medicare are deducted based on the income over the set threshold.
- Other deductions can include state and local income taxes, employee 401K contributions, insurance payments, profit sharing, union dues, garnishments and unemployment insurance etc.
What Happens to Money Takes out or Added to your Paycheck?
It’s the employer’s responsibility to collect, report, and forward the amounts taken/withheld from your paycheck to the Internal Revenue Service (IRS) as well as the appropriate state and local tax agencies. Automating this complicated process is why most businesses use payroll software like Fingercheck – which can do this for your company or business!