How Payroll Adjustments Affect your take Home Pay

You might think that because your job pays you 10 dollars an hour that you would actually make 10 dollars per hour worked. However. you will notice that your take home pay is less than 10 dollars an hour when you see your paycheck each pay period. Why is your pay less than the amount that your employer stated you would get? It is because there are adjustments on your paycheck that lower your actual take home pay.

The first adjustment that is made to your paycheck is state taxes. Your state will take a certain percentage of your paycheck each pay period to cover what you owe. The more you make, the more you will see taken out of your pay assuming that your state has a state income tax. You can usually find your state income tax by going to your state department of taxation website, or you can check with your employer. 

Another major adjustment to your paycheck is federal taxes. Most notably you will see your FICA tax and social security deduction. This will equal roughly 15 percent of each paycheck. The social security tax is what you are paying into the system that you will get back when you retire if you have built up enough credit. 

Have you made any contributions into a 401K or other employee benefit package? This will also reduce your rate of take home pay. Most employers expect that you will pay into your own insurance benefits to some degree as health care costs rise and will also take out money for any retirement plan that they have.

There might also be deductions for other special programs that your employer runs. A charitable donation might be made out of your paycheck as well as any employer run programs such as a gym membership or a softball team. These deductions would be noted on your payroll check and would be itemized somewhere on your check.

Just because you make 10 dollars an hour doesn’t mean that you will actually make 10 dollars an hour. Taxes, deductions and other dues that you owe will come out of your check before you even see it. While most of this is typical, it will deduct the amount that you actually take home each paycheck. You should ask your employer if you have any questions about anything, or go to the IRS website for any tax questions.