The Key Importance of Reading Your Paystub


When tax time rolls around you want to make your pay and deductions are in order. The information posted on your paystub explains where every dollar you earn is going. Whether it is taxes, benefits, or your take-home pay, it has to all add up.

Reading your paystub after each payday eliminates surprises in the long run. Although your pay should not change from payday to payday, mistakes can happen.

Are you wondering if it’s important to read your paystubs? Keep reading to learn more about the importance of reading your paystub every payday.

Your Paystub Outlines Where Your Money Is Going

Employers must account for every penny in their employee’s paycheck. Not doing so can lead to big fines and even criminal charges. If you notice something is off on your paycheck take your concerns to the payroll department.

The importance of using the right paystub template is to make it easy for employees to read their deductions. If an employer simply gave the amount the person is being paid, it would confuse the employee and lead to never-ending calls to payroll office or payroll provider.

Your Paystub Comes with Pay Categories

Pay categories are used on a paystub to classify deductions and the amount the employee is being paid. These categories include:

  • Year-to-date totals
    • Pay earned
    • Actual payments
  • Federal Taxes
  • State Taxes
  • Insurance
    • Health
    • Dental
    • Life
  • Retirement Plans
    • 401(k)
    • Pensions
  • Flexible Spending Accounts
    • Health
    • Dependent Care
    • Transit
  • Health Savings Account
  • College Savings Account
  • Vacation
  • Sick Pay
  • Holiday Pay

There are other categories a company could have on their paystub. There is a universal language for the actual pay codes. However, some employers may use their own.

You Can Catch Errors Quickly

By reading your paystub often you can catch errors quickly. The most common errors are centered around overtime and holiday pay. There are laws that protect employees but the employee needs to understand how they work.

Overtime is paid after an employee works 40 hours. They are then paid time and a half. If you are an employee working less than 40 hours a week, you will be paid your regular rate until you reach that threshold.

Typically, employees ate paid double time when working on company designated holidays. In the service industry designated holidays are less than those in corporate settings. Therefore, you need to know which days count.

Your Paycheck Helps with Your Budget

You may ask, why read your paystub if you know how much money you make. Reading your pay stub helps you create a budget. It holds you accountable for being realistic about your income.

The money coming out of your paycheck should also be listed on your financial spreadsheet.

Are You Reading Your Checks?

Reading your paystub is more than ensuring you are getting paid the right amount. It contains information you can use down the line.

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