How Does Your Paycheck Actually Work?
Your complete guide to understanding what's on your paycheck stub.
By the Easy Guides Editorial Team
The three numbers that matter most
Every paycheck has dozens of lines, but three numbers tell the whole story:
- Gross pay, what you earned before any deductions
- Total deductions, taxes plus benefits and retirement contributions
- Net pay, what hits your bank account
Net pay is usually 65, 75% of gross pay for most employees. The exact percentage depends on your tax bracket, state, and how much you contribute to pre-tax benefits.
What's on your paycheck stub
A typical paycheck stub has six main sections:
1. Employee and pay period info
Your name, employee ID, the pay period dates, the pay date, and how often you're paid (weekly, biweekly, semimonthly, monthly).
2. Earnings
Regular pay (your base wages), overtime, bonuses, commissions, and any other earnings. Each typically shows the hours worked, rate, and amount, both for this period and year-to-date.
3. Pre-tax deductions
Items deducted before federal income tax is calculated. The most common are traditional 401(k), traditional health insurance, HSA, FSA, and dependent care FSA. These reduce your taxable income and lower your tax bill.
4. Taxes withheld
Federal income tax, Social Security tax (6.2%), Medicare tax (1.45%), and state and local income tax (varies). These funds go to government agencies, you'll reconcile federal and state amounts when you file your tax return in April.
5. After-tax deductions
Items deducted after taxes are calculated. Common examples: Roth 401(k) contributions, life insurance premiums, disability insurance, union dues, and wage garnishments. These don't reduce your tax bill but still come out of your paycheck.
6. Net pay and totals
The bottom of your stub shows your net pay (what you take home), plus year-to-date totals for everything. The YTD numbers help you track your progress through the year and spot any errors over time.
What you should check every payday
- Hours and rate, make sure your hours and pay rate match what you actually worked
- Overtime, overtime pay is required at 1.5x for hours over 40/week (in most cases)
- Federal withholding, should be roughly proportional to your salary; big jumps may signal a W-4 issue
- Pre-tax deductions, 401(k) and HSA amounts should match what you elected during open enrollment
- YTD totals, should grow consistently each pay period
If anything looks wrong, contact HR or payroll right away. Errors are easier to fix in the same pay period than after they've cascaded across multiple checks.
Common questions
How does a paycheck actually work?
You start with gross pay, the amount you earned. Pre-tax deductions like a 401(k) come out first, then federal income tax, Social Security, Medicare, and state tax. Whatever is left is your net pay, the amount that lands in your bank account.
Why is my paycheck smaller than my salary divided by 26?
Taxes and benefits are the gap. A single filer usually loses roughly 20% to 30% of gross pay to federal tax, FICA, and state tax combined, before health insurance or retirement savings come out.
What is the biggest deduction on most paychecks?
Federal income tax for most people, with FICA close behind at a flat 7.65% of wages. In high-tax states, state income tax can rival both. Our calculator breaks your own paycheck into these lines.