Pay stubs can provide income information.  However, the most important details are not always immediately obvious. Careful review and analysis are often necessary to ensure income is calculated accurately and consistently.  The following guidelines can help identify and interpret key elements found on pay stubs.

Pay Stub Identification

Verify that the pay stub clearly identifies both the employer and the employee. Ensure names, employer information, and pay dates are complete and legible.

Rate of Pay

Review all submitted pay stubs to determine whether the employee’s rate of pay has changed. Wage increases or decreases can easily be overlooked, especially when the hourly rate is not displayed on every pay stub.

Also review the pay stubs for:

• Shift differentials
• Overtime rates
• Multiple pay rates
• Premium or incentive pay

These additional earnings may significantly affect the employee’s total income and should be evaluated for consistency and likelihood of continuation.

Hours Worked Per Pay Period

Compare hours worked across all pay stubs and look for inconsistencies or unusual fluctuations. If any pay period appears unrepresentative of normal earnings, obtain an explanation and document the reason.

Year-to-Date (YTD) Earnings

Use Year-to-Date (YTD) earnings to estimate amounts for missing pay stubs when necessary. YTD figures can also help:

• Identify wage increases or decreases
• Verify consistency of earnings
• Detect fluctuations in hours or pay
• Estimate the employee’s length of employment with the employer

Comparing YTD totals across multiple pay stubs can help confirm whether current earnings accurately reflect the employee’s ongoing income pattern.

Check Date

In months where actual pay is considered, it is important to know when a check was received.  Be sure to use the actual pay date, the “Pay Period Ending” date may differ from the payment date. Check dates can also help confirm the employee’s pay frequency.

Gross Income

Always use gross income rather than net pay. Gross earnings may include:

• Regular wages
• Holiday pay
• Sick pay
• Overtime
• Bonuses
• Commissions
• Tips

Overtime

Review overtime hours across all pay stubs to determine whether a consistent pattern exists. Do not automatically exclude overtime simply because it varies from pay period to pay period.

Determine whether overtime is expected to continue. When including or excluding overtime from income calculations, clearly document the reason for the decision while still using the employee’s regular earnings to calculate base income.

If the pay history is unclear or inconsistent, confirm representative earnings and expected overtime directly with the employer when necessary.

Bonuses

Determine how frequently bonuses are received and whether they are expected to continue during the certification period.

Predictable bonuses should either:

• Be counted in the month received, or
• Be averaged over the period they are intended to cover

Tips

Determine whether tips shown on the pay stub are:

• Allocated tips, or
• Actual tips received

Do not consider allocated tips as income. Document the actual amount received by the client, since reported tip amounts may not reflect true earnings. Document and verify tips with the employer as needed.

Reimbursements

Reimbursements are not considered income. Common examples include:

• Mileage reimbursements
• Uniform allowances
• Tool allowances
• Per diem payments

Garnishments

Garnishments are considered part of the client’s income and should not be excluded from gross income. Identify the purpose of the garnishment, as it may relate to:

• Court-ordered child support

Earned Income Tax Credit (EIC/EITC)

Earned Income Tax Credit payments are exempt income for all programs and should not be counted.

Flexible Benefits

If the employee does not have the option to receive unused medical or benefit contributions, employer-paid benefits are not counted as income.

However, if unused benefit amounts can be paid directly to the employee, those amounts must be counted as income.

Partial vs. Full Pay Periods

Do not use a partial pay period to project future earnings when it represents the employee’s first paycheck.

Partial pay periods may be used to verify actual income for an initial application, but future income projections should always be based on full pay periods.

Representative Pay

Determine whether the pay provided represents the client’s expected future earnings.

Document reasons for:

• Missed workdays
• Illnesses
• Reduced hours
• Temporary absences

Evaluate whether similar circumstances are likely to continue during the benefit period.

Fluctuating or Irregular Income

Many clients have fluctuating income. During the interview process, gather as much information as possible regarding:

• Whether the income is expected to continue
• Whether future payments can reasonably be anticipated

Check the Back of the Pay Stub

Additional information may appear on the back of the pay stub, including explanations of:

• Deductions
• Benefits
• Payroll codes
• Employer contributions