If you’ve just landed your first job, take the time to understand your paycheck. Know what money and benefits you are entitled to receive, as well as what taxes and other deductions will be taken out of your paycheck. Once you are familiar with these items, be sure to review each paycheck for accuracy. The basics of your paycheck are explained below, but ask your employer for clarification if you have any questions because the specifics are dependent upon your location and workplace.
Pay Frequency
You could be paid in weekly, biweekly, or monthly intervals, but the exact timing of your paycheck will depend on your workplace and location. State law dictates how often an employer is required to pay you. It can be more frequent, but not less often than required by law.
Payment Method
Your employer should make arrangements with you in regards to how you receive your paycheck – by check, pay card, or direct deposit. If you receive a paper check, you can cash it or deposit it into your bank account. Pay cards are not used routinely, but they are an option for anyone without a bank account. They work similarly to debit cards in that they store value like cash. In recent years, the preferred payment method for most workplaces is direct deposit, which is described below.
Direct Deposit
Many employers give the option of using direct deposit, which means that your employer will electronically deposit your wages directly into a bank account. You must permit your employer to access your bank information, and you can specify which account and the account type (checking or savings) as well as which financial institution you’d like to use. Your employer may ask for the information in the form of a voided check or deposit slip. The information they need is the name of the institution, its routing number, and your account number. On payday, you should see the money available in your account, ready for use.
Benefits of direct deposit:
- It’s convenient – Your check is deposited into your account automatically, so there is no need to go to a bank to deposit your check.
- It’s safer – Your paycheck cannot get lost or stolen.
- Your earnings can gain interest – If you deposit your money into a savings account, it can start earning interest immediately.
- It’s flexible – You can split your payment by depositing portions into more than one account.
Your Pay Statement
For each pay period, you will receive a record that accompanies the payment – either a pay stub (accompanying a paper check) or a statement (online or by mail). If you enroll in a direct deposit system, you will not receive a physical check, but instead, you will receive a statement that gives details. Some of the information included on your statement: the pay period, date of payment, your wages before and after taxes (federal, state, and local), deductions for social security, Medicare, and anything else (such as insurance), and hours worked if you aren’t salaried. This statement may come in the mail, but many companies have switched to paperless statements so that you can view them online only.
Your statement will also indicate your gross pay and net pay. Gross pay is the total amount of wages, including overtime and bonuses, you have earned. This amount is what is used to determine your taxable income. The net pay is how much money you receive after accounting for taxes and any other deductions, also known as “take-home” pay.
It’s important to always view your statement each pay period to check for accuracy, especially if you work overtime or in a capacity in which you receive tips.
For more information about understanding your paycheck, including status, taxes, tips, and more – check out our free download here;
