Understanding Your Paycheck (Without the Headache) Part I
This is Part I of our 4-part Paycheck Series. No jargon, no headaches — just straight answers.
You worked the hours. You did the job.
Then your paycheck shows up, and the number is smaller than expected.
Where did the rest go? We’ll break it down in simple terms.
Step 1: Gross Pay (Your Total Earnings)
Gross pay is the amount you earned before any taxes are deducted.
This includes:
Example:
You work 40 hours at $22/hour × $22 per hour = $880 gross pay
If you worked overtime: 40 hours × $22 per hour = $880 | 5 overtime hours × $33 per hour = $165
Total gross pay = $1,045
This number is not the total you are paid.
Step 2: Taxes
Next, taxes come out.
Most paychecks include:
These taxes fund things like Social Security retirement benefits, Medicare healthcare, and public services like roads and schools.
You’ll see each one listed as a separate line on your pay stub.
Quick note: how much comes out depends on your state, your filing status, and the withholding elections you made on your W-4. So your number may look different from another coworker who is doing the same job.
Step 3: Other Deductions
Some deductions depend on your job and your benefits.
Common deductions include:
Some employers also deduct for things like uniforms or tools. If you see deductions like these on your stub, know that federal law requires your take-home pay to stay at or above minimum wage: deductions can’t bring you below the minimum. Some states have even stricter rules. If something doesn’t look right, it’s worth asking your HR or payroll department.
Step 4: Net Pay (Your Take-Home Pay)
After all deductions come out, what’s now left is your net pay: the money that actually hits your bank account.
Example:
Gross Pay: $1,045 Taxes: − $230 (this is an estimate; yours may vary) Benefits: − $75
Net Pay: $760
That’s the amount deposited.
Quick Tip
If your paycheck ever seems way lower than expected, check these three things first:
1️⃣ Did you work fewer hours than you thought?
2️⃣ Did overtime get paid correctly?
3️⃣ Did a new deduction start (benefits, union dues, etc.)?
Mistakes happen, and they’re much easier to fix when you catch them early.
Coming Up: Part II
Why do your taxes change even when your hourly wage stays the same?
Spoiler: overtime and tax brackets confuse a lot of people. We’ll help clear it up.
Please note: this is general information only and is not tax or legal advice. Please consult an accountant or financial professional for information specific to you and your needs.
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