What to Look For on a Pay Stub

Written by Mike Sprague, Spectrum Enterprises

Whether you are required to obtain them or 3rd party verification was not available, you have all used pay stubs to verify employment income at some point.  But when you reviewed the stubs, did you utilize all of the valuable information that they provide?  In many ways, pay stubs can be a better verification tool than an EV (Employment Verification) as it can tell you things that an EV does not, and it may show you some information that is not on the Application.

 When you first look at the stubs, you should always make sure that the employer and employee names match the information from the Application to ensure that you have been provided with the correct information.  From here, depending on the detail on the stubs, you should be able to tell the employee’s marital status and if any dependants are claimed.  You can then compare this to the HH composition on the Application.  Be sure to follow up if there are any discrepancies. 

The pay stubs will provide you with gross earnings info, both current and YTD.  Using both the YTD and current earnings will give you two income calculations to compare.  When calculating income based on the YTD, it is best to use the same pay frequency.  For instance, if the pay stubs show that the pay frequency is semi-monthly, you should annualize the earnings based on 24 pay periods.  If the employee has had consistent work history then this info should be relatively close.  If you come up with a large variance between these amounts then follow up will be needed to show due diligence.  Some examples of reasons for variances could be maternity leave, OT, more or less hours during peak or slow periods, bonuses, or a recent raise.  Determining the cause of the variance will help to determine an accurate income determination.

Another piece of info to look for is how the employee is paid.  The pay stubs should show whether it is by check or by direct deposit.  If it is direct deposit then you will know that the applicant has a bank account that will need to be verified.  The pay stubs should also inform you as to whether or not the applicant has a 401K or other retirement account.  Again, compare this info to the Application to see if additional follow up is required.

While it is not as common to see, the pay stubs will also show if there are any garnishments, such as child support.  How could this info be useful?  Let’s say that you have an applicant that is separated and lists a child as the only other occupant.  The applicant qualifies based on the 2 person income limit, but would be over income based on the 1 person limit.  As per the HUD 4350, in order to be considered a HH member, the applicant must have at least 50% custody of the child.  If you see that the applicant has a $50 child support garnishment withheld on the pay stub each week, it may mean that the applicant does not have the required 50% custody. 

Pay stubs offer a lot of meaningful information that will help you to determine eligibility.  Whenever you receive pay stubs for an applicant, be sure to look at all of the info on the stubs.  Then compare this info to the information provided on the Application.  You may find that there is some information that needs to be clarified.


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