Your salary is one of the first things you want to know when you start a new job. Unfortunately, you might be in for a surprise when you open your first paycheck because mandatory and voluntary payroll deductions reduce the amount you actually receive.
Mandatory Payroll Deductions
Employers are required by law to withhold several deductions from your paycheck. If they do not comply, they can face fines, lawsuits and other penalties.
- Federal income taxes
- State taxes that vary by the state where you are employed
- Local taxes if required by your city or municipality
- Court-ordered withholdings for child support, bankruptcy repayment, or other wage garnishments
Your employer also withholds Federal Insurance Contributions Act (FICA) taxes, which include a social security tax (6.2 percent) and a Medicare tax (1.45 percent). Employers generally contribute matching amounts for these taxes, and higher earners may pay additional Medicare tax.
Voluntary Payroll Deductions
Other payroll deductions are not required by federal law but are common because they are convenient for you or your employer. You can opt in or out of many voluntary deductions through your Human Resources department.
- Your portion of employer-provided insurance benefits, such as health, dental, or vision coverage
- 401(k) retirement contributions beyond any employer match
- Premiums for additional employer-sponsored life insurance
- Charitable donations to eligible organizations
For information about employer insurance options and how they relate to staffing operations, see Employee Staffing Services Insurance.
How are Payroll Deductions Determined?
The amount of salary you earn before any deductions is called gross pay. Mandatory and voluntary payroll deductions are taken from your gross pay, and the remainder is your net pay, which is the amount shown on your paycheck.
Payroll deductions affect every paycheck you receive, so check each pay stub to make sure deductions are correct. If you need clarification about required withholdings or employer-provided options, talk to your Human Resources manager.
If you have questions about employer obligations or insurance options for staffing and leasing firms, see Staffing and Employee Leasing Insurance.
Frequently Asked Questions
What are the most common mandatory payroll deductions?
Common mandatory deductions include federal and state income taxes, local taxes where applicable, court-ordered garnishments, and FICA taxes for Social Security and Medicare.
Can my employer deduct for benefits I don't use?
Employers generally cannot deduct costs for benefits you do not enroll in, but they may require employee contributions for coverage you choose to participate in.
How can I verify the deductions on my pay stub?
Review the pay stub line items, compare them to your benefit elections and tax withholding form (W-4), and ask HR for an itemized explanation if something looks incorrect.
What should I do if a deduction is incorrect?
Contact your Human Resources or payroll department as soon as possible to report the error and request a correction on the next paycheck or a separate adjustment.