Unlock your team's financial literacy: An hourly worker's guide to pay stubs

Employer introduction

Ensuring your employees understand how to read their pay stubs can have a significant impact on their financial well-being and your business's bottom line. That's why we've created this comprehensive guide specifically tailored for hourly workers. By equipping your team with the knowledge to understand their pay stubs and their take-home pay and empowering them to double-check each line item for accuracy, you can improve retention, boost morale, and enhance overall job satisfaction.

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Employee introduction

Disclaimer: These materials are intended to provide you with general information and are not intended as tax or legal advice. Accordingly, as each individual’s employment and tax circumstances may vary, these materials may not address your unique situation. We encourage you to consult with your tax professional or attorney or seek guidance from your state or local employment agency if you have any questions. Employment and tax laws vary by jurisdiction and change over time; please consult with your professional advisor or appropriate governmental agency before making any filings, financial planning, or legal decisions.

Congratulations! You just got a new job! No matter where you’re working or whether it’s a part- or full-time position, one thing is for sure: You’re probably already anticipating that first paycheck.

But before you get it, it’s important to ensure you understand what you can expect on your pay stub so there aren’t any surprises. You’ll realize that your calculated pay isn’t as simple as multiplying your hourly pay by how many hours you work. There will be taxes withheld and potential deductions that will affect the amount you receive in your check. And if you don’t know how to read your pay stub, it can be confusing to figure out how your take-home pay was actually calculated.

In this article, we’ll break down the anatomy of a pay stub so you know exactly what to expect when that sweet first payday finally comes.

Breaking down your pay stub

First thing first: What is a pay stub? A pay stub is a document that summarizes how your earnings were distributed during a certain pay period. It typically has three parts: how much you’re getting paid, your taxes, and your deductions.

In addition to personal information like your name or employee ID, your pay stub will cover a lot of important information you will want to review and retain for your records. If you regularly check your pay stubs for accuracy, you can also hold your employer accountable to ensure you’re getting paid correctly.

Let’s walk through each pay stub section together.

Pay period

Every pay stub you receive covers a specific pay period—this could be weekly, biweekly, semimonthly, or monthly, depending on your employer’s pay schedule. The pay period shows the start and end dates for the time covered in your check. This is especially helpful if you want to verify that you’re being paid for all hours worked, including any overtime, holiday, or weekend hours.

Hours worked and pay rate

This section tracks all hours you’ve worked, broken down by type: regular, overtime, and any premium hours (such as holiday hours). You’ll want to check this carefully to ensure all shifts and special pay rates are recorded accurately, especially if you’re picking up extra shifts, working split shifts, or working late into the night. This section can be a good checkpoint to make sure no hours are missed.

Gross pay

The gross pay number is the amount you earned before any deductions or taxes were taken out.

For hourly workers, there’s a lot that can go into this number.

Your hours worked multiplied by your hourly rate (Note: This can vary depending on whether you worked shifts at different rates in the same pay period. For example, if you worked overtime, you want to check that those hours are calculated at the correct overtime rate.)
Tips (allocated, reported, and/or pooled tips) will also appear in this section, though they may also appear in the deductions section if your employer handles tax withholdings on tips
Any shift or sales bonuses
You may also see an item for Minimum Wage Adjustments. This is any additional compensation provided to meet minimum wage standards

Before you get too excited about this number, remember that this won’t be the amount you actually take home.

Deductions

The deductions category is a catch-all for anything subtracted from your gross pay. Deductions include mandatory taxes (like federal, state, and local taxes), garnishments (like child support), as well as any voluntary deductions you’ve opted into, such as health insurance, retirement contributions, or employee-funded benefits. These deductions vary greatly by employer and whether or not you work enough hours to qualify for full-time benefits.

Common hourly worker-specific deductions might include:

Tax withholding (Federal and State): As an hourly worker, your tax withholdings are often calculated based on each individual paycheck, meaning that varying hours and overtime can change how much is withheld from pay period to pay period.
Uniform or equipment deductions: In certain industries, hourly workers may see deductions related to uniforms, tools, or other work-related items if these aren’t provided by the employer.

Note: Most hourly workers should expect to fill out a W-4 form when they’re initially hired, which covers a variety of information, like if you work any other jobs. Your W-4 will directly impact the deductions taken out of your paycheck, so if you ever have any questions about what you see on your pay stub, it’s important to reach out to your company’s HR rep. It’s also good practice to revisit your W-4 each year, even if you stay at the same job, to ensure tax withholdings reflect your current financial situation.

Net income (Net pay)

One of the most important numbers on your pay stub is your net income or net pay. This is the amount you'll take home after all the deductions have been made. For hourly workers, net income can vary widely depending on hours worked, overtime, and deductions. Since this is the final “take-home pay” amount, it’s a good idea to review it each pay period to ensure there are no unexpected deductions and to verify that it matches the hours you worked.

Year-to-date (YTD)

The year-to-date amount conveys how much you have earned so far within the calendar year. You may also see this number displayed as YTD. This is helpful if you’re tracking annual earnings, aiming for a certain income target, or wanting to see how much you’ve contributed to benefits or tax deductions. For hourly workers, this number can fluctuate, especially if your hours vary from week to week, making it a good reference for tracking progress toward yearly financial goals.

Sometimes, you’ll also see Accrued Paid Time Off listed in this section. This tracks accrued, used, and remaining hours for vacation, sick time, or other types of paid leave, offering a snapshot of PTO balance for hourly workers.

In summary

Understanding each section of your pay stub helps you stay on top of your earnings, deductions, and overall financial well-being. For hourly workers, where hours and income may fluctuate week to week, regularly reviewing your pay stub can be a powerful tool to avoid any surprises and ensure you’re getting paid accurately. By staying informed and proactive, you’re better equipped to make confident financial decisions and address any discrepancies right away. Remember, if you ever have questions about your pay, don’t hesitate to reach out to your HR representative—they’re there to help make sure everything adds up for you.

Download the guide to keep this handy reference close by.

anatomy of paystub infographic