How to calculate a payslip

Written by grace ferguson
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How to calculate a payslip
A payslip shows how your employer arrived at your net pay. (check in macro image by Alexey Klementiev from Fotolia.com)

A payslip is also called a pay stub or a pay advice. The United States Department of Labor states that under the Fair Labor Standards Act, employers are not required to give employees a payslip, but state law might. Therefore, if state law requires it, the employee is entitled to a payslip for each pay period. The payslip shows a breakdown—or the terms—of the payment. You should make an effort to understand your payslip to ensure that you were accurately paid.

Skill level:
Easy

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Instructions

  1. 1

    Determine your gross earnings. This is the amount of your pay before deductions happen.

    Suppose you’re salaried on a weekly pay cycle earning £30,550 annually. Calculation: £30,550 / 52 weeks = £587.5, weekly gross pay.

    If you’re hourly, multiply your hours for the pay period by your hourly rate. Suppose you’re paid hourly on a biweekly pay cycle. Calculation: 80 hours x £7/hour = £624, biweekly gross pay.

    If your payslip shows additional pay, such as overtime, bonuses or commissions, add the amount to your regular gross pay.

  2. 2

    Subtract voluntary deductions, such as company-sponsored benefits and deductions that you agreed to. This includes retirement benefits; medical, disability, dental and life insurance; loan repayments; parking fees; union dues; and charitable contributions. The remainder is your take-home (net) pay.

  3. 3

    Subtract the statutory deductions listed on your payslip from your gross earnings. This includes all mandatory deductions, such as federal income tax, Social Security tax, Medicare tax, and state/local/city income tax (if applicable). Make sure you understand how much of your income is taxable. Many voluntary deductions are taken out before federal taxes. Furthermore, subtract wage garnishment/levies and child support, if applicable.

Tips and warnings

  • When subtracting deductions, ensure you use the current amounts listed on your payslip, not the year-to-date (YTD) amounts. The latter gives you the amount deducted thus far for the year.
  • Learn the abbreviations on your payslip; this varies by employer. For example, federal income tax may show as FIT, Social Security tax as SS, medical insurance as MED, and child support as CH SUPP.
  • If your payslip does not match your calculations, let your employer know.

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