Do you consistently review your paycheck for accuracy? If not, how can you verify that you are being paid the proper amount? Part of setting yourself up for financial success relies on maximizing your income, which can’t be done if your employer is constantly making mistakes with your pay each week. In this article, we’ll cover the five key areas you should be double checking on your paycheck each pay period.
1: Start and Stop Times
The first area you want to review is your start and stop times. Hourly employees usually clock in and out of work using a punch clock or other timekeeping app. These devices aren’t foolproof and can make mistakes, especially around time changes and meal breaks. In addition, forgetting to punch back in on lunch could result in the loss of hours on your paycheck.
To double check your start and stop times, utilize a shift tracking app, like Shillings. With this resource, you can not only track your hours to verify the accuracy, but you can also project your pay to get an accurate picture of what to expect on payday.
2: Taxes
Another key area of your paycheck is your tax withholding. Income tax is charged based on your expected taxable income, with rates reaching up to 45%. National Insurance Contributions (NICs) might also come into play, depending on how much you make. If you are expecting significant changes in your income, it might be time to revisit your withholding rate.
Most employees benefit from having more money back in their pocket each pay period rather than receiving a large tax refund at the end of the year. Looking at your taxes from the prior year and projecting your income with a shift tracking app are great places to start when it comes to changing your withholding rates.
3: Pre-Tax and Post-Tax Deductions
There are both pre-tax and post-tax deductions that might be on your paycheck. Pre-tax deductions are taken out of your paycheck before taxes are calculated, while post-tax deductions are subtracted after. Pension contributions, child maintenance, and student loan payments are all examples of pre-tax deductions. On the contrary, certain court orders and NICs are post-tax deductions.
Ensuring your pre-tax and post-tax deductions are properly computed is important. Let’s say you have a 100 GPB pension contribution, make £1,000 during the pay period, and have a tax rate of 20%. Pension contributions are a pre-tax deduction, so the tax you pay would be based on £900, resulting in £180 of taxes. However, if the deduction was accidentally marked as post-tax, your tax base would be £1,000, creating a tax liability of £200. Can you see the difference?
4: Retirement Matches
Many employers have discretion in their retirement plan match. Regardless of which type of plan your employer has in place, you want to double check that contributions are properly being made. For example, if your employer matches 3% of your pay, you should confirm that 3% is actually being documented on your paystub, especially if you are hourly or receive extra compensation, like a bonus or a commission check.
Moreover, you should also verify that these contributions are physically being remitted to your retirement account. Your paystub might show withholding, but if nothing is ever deposited into your retirement account, you have an issue. Most employer-sponsored retirement plans come with apps that allow you to track both you and your employer’s retirement contributions.
5: Overtime
Overtime can be tricky to calculate during longer pay periods, like bi-weekly or semi-monthly. Each pay period, you should double check that your overtime is properly paid. You can’t always rely on the payroll processor to differentiate between normal hours and overtime. This is why using a shift tracking app is so important.
When you have your own data to compare to your paystub, you can easily detect mistakes. If you make £14 per hour and five hours of overtime at time and a half is misclassified, this is a £35 difference. Now multiple overtime discrepancies throughout the year and you could be losing thousands.
Getting Started
The first step in reviewing your paycheck should be investing in a shift tracking app. This resource can help you verify your overtime, gross wages, and assist you in projecting your upcoming pay for better financial planning. For more useful information to help make your earnings go that little further, subscribe to our updates below.