Direct Deposit eliminates the need to deposit a paycheck into a bank account. However, you don’t get the "pay stub" that the check would come with. The pay stub shows the gross pay and lists the deductions (and additions, if you’re lucky) that explain how the net pay was determined. Gross pay, net pay and deductions are shown on the pay stub for both the current pay period as well as year to date (YTD) totals.
Employees who participate in Direct Deposit can access a virtual pay stub on the payroll provider’s website. It’s a good idea to download each pay stub from that website as soon as it’s available. As well, any tax documents (such as the W2) and benefit summaries also should be downloaded. Why? Because if you're ever fired or laid off, you’ll have no time to get them before you exit – your employer will escort you directly to the exit. Your access to the payroll site is through your computer account, which would be disabled. The employer might set up special, limited-time access to the website, but there’s no guarantee they will do so.
Why do you need pay stubs? Loan officers might ask to see them to verify employment and salary. Your state’s department of labor might need them to determine eligibility for unemployment benefits. I like to use the last pay stub of the year to estimate my tax refund – if I think I’ll get a large refund, I might be motivated to file early.
The W2 probably will be mailed to you. But you might as well download the PDF so that you don’t have to scan in the paper copy for your records. Some tax preparation software might be able to read the PDF file and enter the values for you.
The payroll site might have other useful documents. One in particular is the Total Compensation Summary. It would list the value of insurance (health, dental, life, etc.), cash bonuses, stock awards1 and tuition reimbursement (etc.) and then sum them up for you. Unless you receive only a fixed salary and no other benefits, this can help you compare job offers against your current (or former) job.
It’s so easy to overlook or ignore pay stubs and other payroll documents. But I hope you don’t.
1 Including the value of stock awards on this document is misleading because:
- Companies usually award restricted stock, which cannot be sold immediately; it has to be vested first.
- The amount of the stock award is based on the share price at the time of the grant, and that price could be much lower by the time it’s vested. In fact it could be 0 if the company goes out of business.