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Understanding Your Paycheck

August 11th 2015 by
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If you have ever looked at your paycheck and did not know the meaning of each part of it, it’s time to learn.  Besides just knowing where your money is going and why, you could possibly be missing errors that have been occurring that you can now rectify.

Basic Terms

The first few terms to understand are: YTD, Pay, and Deductions:

  • YTD = Year-To- Date – You will often see this in categories such as pay, deductions, and taxes.
  • Pay = your gross pay – What you earned before taxes are taken out
  • Deductions = Any benefits you share the costs of with you company such as healthcare.

Taxes and Social Security

The two biggest sections of your paycheck will usually be Federal Income Tax and Social Security.

Federal Income Tax is the amount of income tax your employer withholds from your paychecks which is determined by your gross pay, tax filing status, and allowances.  The more allowances you take, the less money that gets withheld for federal taxes and more money gets added to your paycheck.

You employer also withholds an amount of tax to pay into US Social Security.  Every worker contributes 6.2% of their gross income directly into the Social Security Fund.

There is also a section of your paycheck for Medicare.  Every worker contributes 1.45% of their gross income to Medicare which provides hospital, medical, and surgical benefits for Americans over 65 years old.  This section accounts for a large portion of the difference between your gross income and net income.


The benefits section of your paycheck is usually where your used and remaining hours for paid vacation and sick time are denoted.  This section does not include your health insurance or 401(k) benefits.  These benefits would be listed under deductions.

Direct Deposit

If you have direct deposit in place, the last few numbers of you account will be on your pay stub  in which you will receive your money.  if you are handed a check, after deductions and taxes are taken out, the money you will be receiving is what “Net This Check” will refer to.

Be sure to now check your paycheck for errors and contact your human resource manager if there are any inconsistencies.


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