It is a common misunderstanding amongst people that a pay stub, is your pay check. However, that is not true. Pay stub is a part of the pay check, a separate document that includes every particular about the employee’s pay.
It includes details about work hours, applicable taxes paid and remuneration of a specific day and YTD – year to date payroll. Pay stubs are issued in either electronic or printed forms, but with the rise in the E-commerce industry electronic is gaining popularity.
Pay stubs are of immense importance for not only employees but employers too. It is a form of evidence that the company is compensating justly and the deductions being made are legit.
What would you find on a pay stub?
A pay stub helps in keeping track of the payments and deductions. You will find these on your pay stub
- Your Name
- Pay period and date
- Hours worked
- Gross pay
- Deductions (income tax, voluntary deductions)
- Employer contributions
- Net pay
Generally, gross pay is the amount of an employee’s compensation for his service, before the tax and other deductions. It includes set wage, overtime, commissions and bonuses. Gross wages can be calculated daily, monthly, quarterly or annually.
Amount cut from an individual’s gross pay. There are two types of deductions
1. Government-mandated –These deductions are made by the employer and sent to the Government. For example, Income Tax
2. Voluntary –deductions are made from the receiver’s end to various departments for facilities. Example life insurance, medical insurance etc.
Net pay is the leftover sum of money the employee receives after all the deductions (government & voluntary) and contributions (bonuses, overtime, etc.)
Calculation of Net Pay
The simplest formula to calculate Net Pay
Gross pay – Deductions (both kinds) = Net Pay
YTD- Year to date Pay
Year to date pay refers to the amount an employee earned from 1st January of that year or the first day of that fiscal year to the current date. If looked closely at a paycheck, there are two kinds of YTD amounts mentioned,
- YTD gross – gross earnings of the year
- YTD Net-net earnings of the year
Difference between net pay and “YTD Net Pay”
The net pay of a person is the sum of amount he or she takes after all the necessary deductions have been made. When a person is asked his or her salary, they are referring to the “gross” amount.
Net pay can be of a day, week, month or the whole year. Net pay can be defined as the amount an individual is making at that particular time. When we are talking about Net pay for the whole year, be it fiscal, or from January 1st, it is called YTD (year to date) net pay.
When the net pay from the first day of the year or fiscal to the current date is added together, it is called YTD Net pay. Net pay makes up YTD Net pay.