Paycheck

Salary versus Hourly

Depending on your employer and your position, you will be paid salary or an hourly wage. Salaried positions receive the same amount per period, regardless of hours worked. Someone paid hourly may have variance in his or her paycheck based on the hours and days worked. Be sure to check your paystub regularly to make sure you’re being paid correctly and your deductions are accurate.

Pay Period

A pay period is the number of days for which an employee is paid. Employers may schedule pay periods weekly, biweekly, bimonthly, or monthly. Pay attention to this and structure your finances and bills according to when your money is available to avoid overdrawing your bank account.

Weekly

Employees receive a paycheck each week, typically on a Thursday or Friday.

Biweekly

Employees receive a paycheck every other week, usually on a Thursday or Friday.

Bimonthly

Employees receive a paycheck twice a month on a specified date, typically the first and 15th of the month.

Monthly

Employees receive a paycheck once a month, often on the first or last day of each month.

Gross Pay vs. Net Pay

Gross pay is the amount of money your employer pays you before taxes are taken out. Net pay is the amount of money you have after taxes have been taken out. Net pay is the actual amount of money that will be issued and can be deposited into your account.

Nonexempt vs. Exempt

Nonexempt employees are paid hourly and receive overtime (one and a half times the normal rate) for working more than 40 hours per week. Exempt positions are salaried positions. The pay of exempt employees does not change regardless of the hours worked, and such employees are not eligible for overtime pay.

Sample Paycheck

Under federal law, certain deductions are automatically taken from your paycheck. At first, you may feel cheated by the system or distraught that you worked so hard for so little. Don’t be discouraged. Understand your paycheck and what these deductions actually mean and that these deductions are something positive.

• Item 1: Employer information: name and address
• Item 2: Earning statement pay period: date range for payment
• Item 3: Employee information: name and address
• Item 4: Employee tax data: number of withholdings
• Item 5: Hours, earnings, and gross pay: hours worked for the pay period and amount earned
• Item 6: Deductions: taxes and insurance
• Item 7: Net pay: amount after all deductions
• Item 8: Other benefits and information: sick, vacation, and personal hours and company news and events.

Note: Some checks may use the abbreviation FICA (Federal Insurance Contributions Act), which includes Medicare and Social Security.

Direct Deposit

With direct deposit, your funds will be deposited automatically into your account on payday. When you sign up for direct deposit, your paystub will look similar to the one above, except the actual check will be different. In place of the check number, there will be an “advice number” and the words “THIS IS NOT A CHECK” and “NON-NEGOTIABLE” will be printed on it.

Deductions

Generally, employers only can withhold funds from an employee’s paycheck (1) when the employer is required or empowered to do so under federal or state laws, (2) when the employee authorizes wages withheld for insurance or benefits contributions, or (3) when a lien or deduction is authorized under a collection agency.

Automatic deductions include state and federal taxes, social security, and Medicare taxes.

Unauthorized Deductions

Regularly check your paystubs. If you think something is wrong, ask your human resources or payroll department. Intentionally or unintentionally, sometimes an employer may illegally deduct funds from your check. Common unauthorized or illegal deductions include the following:

Gratuities

If you work in an industry where you make gratuities or tips, your employer can’t take or deduct the amount from your wages. However, some restaurants may enact a tip sharing policy to evenly disperse funds.

Photographs

If your employer requires a photograph for employment, it must be at the cost of the employer.

Uniforms

If a uniform is required, the employer must pay the cost if deducting it from the employee’s wages results in the employee making less than minimum wage.

Business expenses

As an employee, you are entitled to be reimbursed for any expenses lost or incurred during a legitimate, business-related activity, not including commuting costs.

Broken or damaged property

Lost, damaged, or broken property cannot be deducted from an employee’s pay provided the loss or damage occurred by no fault of the employee. If an employer can prove the damages or losses were caused by a dishonest or willfully negligent act, the losses may be docked from your pay.

If your employer unlawfully deducts funds from your paycheck, either file a wage claim with the Division of Labor Standards Enforcement in your state or file a lawsuit.