A pay stub is a document that an employee typically receives either as a notice of a direct deposit transaction into the employee's financial account, or as part of the printed version of a paycheck, which is delivered to the employee. Typically a pay stub details an employee's gross income and all taxes and any other deductions, such as retirement plan contributions, insurances, garnishments, or charitable contributions, taken out of the gross income. A pay stub also includes the employee's net income (i.e., income after deductions). The aforementioned financial information included on a pay stub is typically included in two amounts: the amount for a current pay period, and the year-to-date amount. Thus, for example, a pay stub includes the social security deductions taken for a current pay period and a year-to-date amount that indicates the total amount of social security deductions taken so far in a calendar year. In addition, a pay stub may include other details, such as the amount of vacation time an employee has accrued thus far in the year and the pay period dates. The financial information included on a pay stub is typically calculated by a payroll software or service provider used by the employer. The payroll software includes equations, tables, etc., that are used to calculate the financial information seen on a typical pay stub.
Conventionally, the deductions taken out of the employee's gross income can be categorized as pre-tax deductions and post-tax deductions. Pre-tax deductions are deductions that are taken out of the employee's gross income before income tax is applied to the employee's income. For example, retirement plan contributions, health insurance premiums, and medical deductions, such as disability insurance premiums and dependant care benefits, are typically pre-tax deductions. Post-tax deductions include deductions taken out of the employee's gross income after income tax is applied to the employee's income. Post-tax deductions typically include social security tax, employee stock purchase plan deductions, etc.