What is a pay stub? Definition and FAQs

Table of contents

• What is a pay stub?
• What information is on a pay stub?
• Why are pay stubs important?
• What are pay stubs used for?
• Manage payroll with confidence using Xero
• FAQs on pay stubs

Key takeaways

• Review your pay stub regularly to verify that your gross pay, tax withholdings, deductions, and year-to-date totals are accurate and match your employment agreement.
• Keep your pay stubs for at least one year for personal tax purposes, as you'll need them for income verification when applying for loans, mortgages, rental applications, and filing tax returns.
• Access your pay stubs through your employer's online payroll portal or email system, as most employers now provide electronic pay stubs instead of paper copies.
• Understand that pay stubs serve as legal documentation for wage verification and tax compliance, protecting both you and your employer while providing essential records for financial applications and legal proceedings.

What is a pay stub?

A pay stub shows your earnings and deductions for each pay period. It breaks down your gross pay, taxes withheld, and other deductions. Employers must file a Form W-2 for each employee when they withhold taxes.

Your pay stub shows income from several sources, including:

• Salary and wages: regular earnings from hourly or salaried work
• Commission: performance-based compensation
• Overtime: additional pay for extra hours worked

You will also see key deductions, such as:

• Tax withholdings: federal, state, and local taxes
• Insurance premiums: health, dental, and life insurance costs
• Retirement contributions: 401(k) or other retirement plan deductions
• Expense reimbursements: mileage, travel, or work-related costs

Pay stubs may also show your paid time off balances, including vacation days earned, used, and remaining.

Alternative names for pay stubs include payslips and paycheck stubs.

Many employers now deliver pay stubs electronically. Most employers use electronic pay stubs instead of paper. You can get your pay stub by email or through an online portal.

What information is on a pay stub?

Your pay stub includes three main sections: earnings, deductions, and employer details. Knowing what each section means helps you check your pay.

Your pay stub lists your personal details under employee information:

• Name and address: your personal identification details
• Employee ID: unique identifier assigned by your employer
• Social Security number: typically shows only the last four digits

The earnings section shows how your pay is calculated:

• Gross pay: total earnings before any deductions
• Regular hours: standard work hours and hourly rate
• Overtime hours: extra hours worked and premium rate
• Year-to-date totals: cumulative earnings for the tax year

Your pay stub also lists deductions, such as:

• Federal taxes: income tax withheld for federal obligations
• State taxes: state income tax (varies by location)
• FICA taxes: Social Security and Medicare contributions
• Voluntary deductions: insurance premiums, retirement contributions, union dues

Why are pay stubs important?

Pay stubs help you stay compliant with the law and manage your finances. They protect both you and your employer and serve many practical purposes.

Pay stubs offer legal protection in several ways:

• Wage verification: prove you received correct compensation
• Tax compliance: document income for accurate tax filing
• Labor law adherence: ensure employers follow wage and hour regulations

You can use pay stubs for financial benefits, such as:

• Loan applications: banks require pay stubs to verify income
• Budget planning: track earnings and deductions over time
• Expense reimbursements: document work-related costs for tax purposes

For businesses, pay stubs offer advantages like:

• Dispute resolution: clear records prevent payroll conflicts
• Audit preparation: organized documentation simplifies tax audits
• Employee trust: transparent pay information builds workplace confidence

What are pay stubs used for?

You need pay stubs for many financial and legal processes, not just to see your current pay.

You may need to show pay stubs for financial applications, such as:

• Mortgage applications: lenders require recent pay stubs to verify income
• Apartment rentals: landlords use pay stubs to confirm ability to pay rent
• Auto loans: banks review pay stubs to assess loan eligibility
• Credit applications: pay stubs demonstrate stable income for credit decisions

Pay stubs are also useful for tax and legal reasons, including:

• Income tax filing: pay stubs help complete accurate tax returns
• Social Security benefits: document earnings history for benefit calculations
• Unemployment claims: prove previous earnings when filing for benefits
• Legal proceedings: pay stubs serve as evidence in wage disputes or divorce proceedings

Manage payroll with confidence using Xero

You need to manage payroll documentation if you have employees. Accurate pay stubs help you and your team stay compliant with labor laws.

If you are setting up payroll for the first time or managing a team, the right tools help. Xero payroll features let you generate compliant pay stubs, track employee information, and manage deductions automatically.

Ready to streamline your payroll process? Try Xero accounting software for free and see how easy payroll management can be.

FAQs on pay stubs

Here are some common questions about pay stubs.

How do I find my pay stubs?

You can usually find your pay stubs in your employer's online payroll portal. Some employers email pay stubs or give you a paper copy with your paycheck.

Can I create my own pay stubs?

If you are a business owner, use payroll software or a pay stub generator to create pay stubs for your employees. Employees and contractors should only use pay stubs provided by their employer.

How long should I keep pay stubs?

Keep your pay stubs for at least one year for tax purposes. If you are an employer, federal law requires you to keep payroll records, including pay stubs, for at least four years.

Are digital pay stubs legally acceptable?

Yes, digital or electronic pay stubs are legally valid and are standard for most businesses. They work the same as paper pay stubs for proof of income and record keeping.