Payslip (or payroll statement): how to identify improper deductions and why it is essential to keep it

Every month it arrives, on paper or in digital form, and many people barely glance at it. The payslip, also known as a payroll statement, is a true snapshot of wages: it shows how much a worker actually earns and where every cent goes.

Even so, the document remains a mystery for a large portion of people, filled with acronyms and hard-to-understand numbers. It is common for attention to go straight to the net amount — what actually “hits the bank account” — without understanding how that total was calculated.

Learning how to read a payslip is essential to gain control over personal finances and to verify whether labor rights are being respected.

Ideally, every deduction and additional payment should be checked to understand how the final amount is composed and to avoid surprises on payday, says Fabiana Cherubim, professor of accounting and finance at Faculdade ESEG.

Errors on payslips happen frequently. Incorrect social security deductions, unpaid overtime, and confusing abbreviations are among the most common issues. For this reason, experts recommend closely reviewing every payroll statement.

Keeping payslips — including those from previous jobs — is also an important habit. They serve as evidence in labor lawsuits, retirement applications, loan and financing requests, and income tax filings.

To help, g1 gathered the most common questions about payslips and consulted specialists, who explain in a simple and practical way how to read each field, identify inconsistencies, and check whether wages are being paid correctly.

What a payslip is and why it matters in financial life

A payslip is the document that details all amounts paid and deducted from the salary of a formally employed worker. It includes wages, additional payments, and benefits, as well as mandatory deductions such as social security and income tax.

In practice, it works as official proof that the company is paying the employee correctly.

In addition to being legally required, the payslip is essential in several situations: income verification, loan and mortgage applications, retirement processes, and potential labor disputes.

Difference between gross salary and net salary

Gross salary is the total amount agreed upon between employee and employer before any deductions. It appears in the employment contract and serves as the basis for calculating vacation pay, the 13th salary, and FGTS contributions.

Net salary is the amount that actually reaches the employee’s bank account after deductions such as social security, income tax withholding, and other legally required or authorized deductions.

Many workers focus only on the deposited amount. However, it is the gross salary that determines how much is contributed to social security and what forms the basis for FGTS deposits.

Mandatory deductions on the payslip

Payslip deductions fall into two categories: mandatory by law and optional, which depend on employee authorization or collective agreements.

Mandatory deductions:

• Social Security (INSS): a contribution that funds retirement and other benefits.

• Income Tax Withheld at Source (IRRF): a federal tax calculated according to the worker’s income.

• Child support: when ordered by a court.

• Unjustified absences: result in proportional salary deductions.

Optional deductions (with prior authorization):

• Transportation allowance: up to 6% of base salary.

• Meal or food allowance: usually up to 20% of the benefit value, according to collective agreements.

• Health and dental plans: according to the contract and any copayments.

• Union or assistance contributions: only with authorization or assembly approval.

• Payroll loans: require explicit authorization.

Any deduction without legal basis or employee authorization is considered irregular. In such cases, the employee should contact human resources and request a detailed explanation of each item.

How to check social security and income tax on the payslip

Social security and income tax deductions follow official tables updated by the tax authority and the social security system. The amounts vary according to salary range and allowed deductions.

To verify them, workers must consult the current tables and compare the percentage shown on the payslip with their income bracket.

The calculation follows an order: social security is calculated first, on a progressive basis; then income tax is calculated based on gross salary minus social security and legal deductions, such as dependents.

Gross salary may vary from month to month due to overtime, commissions, bonuses, or vacation pay, which changes the calculation base. Therefore, higher deductions are expected in months with additional earnings.

Other deductions that may appear on the payslip

In addition to mandatory deductions, the payslip may include other deductions provided by law or agreements between employer and employee. Common examples include:

• Transportation allowance: up to 6% of base salary.

• Meal or food allowance: symbolic amount defined by collective agreement.

• Health and dental plans: monthly fees for the employee and dependents.

• Salary advance: deduction of amounts paid before payroll closing.

• Payroll loans: installments authorized by the employee.

• Damages to the company: only if intent is proven or contractually allowed.

• Union or assistance contributions: only with explicit authorization.

• Child support: when court-ordered.

Experts stress the importance of checking whether all deductions are clearly listed and whether there are any items the employee does not recognize. In case of doubt, the payroll or HR department should be contacted.

What earnings are and how to check if they are correct

Earnings are amounts added to the salary, such as overtime, night shift premium, hazard pay, commissions, and bonuses.

On the payslip, they appear as additions and vary according to working hours and conditions. To verify accuracy, it is best to compare time records with what was registered in payroll.

Examples of additional payments include:

• Overtime: 50% extra on weekdays and 100% on Sundays and holidays.

• Night shift premium: at least 20% above the regular hourly rate for work between 10 p.m. and 5 a.m.

• Unhealthy work allowance: 10% to 40% of the minimum wage, depending on exposure level.

• Hazard pay: 30% of base salary.

It is also recommended to calculate the regular hourly rate (usually salary divided by 220 monthly hours) to confirm whether overtime and other additions were paid correctly, considering the applicable collective agreement.

How to understand payslip acronyms and terms

The abbreviations used on payslips often confuse even experienced workers. Knowing the basics helps identify errors faster.

• SB: Gross salary

• SL: Net salary

• INSS: Social security contribution

• IRRF: Income tax withheld at source

• FGTS: Severance indemnity fund

• VT: Transportation allowance

• VR: Meal allowance

• HE: Overtime

• DSR: Paid weekly rest

• Night add.: Night shift premium

A practical strategy is to create a small “payslip dictionary” and compare the current statement with the previous month’s. Over time, workers recognize the codes and more easily spot irregularities.

What must appear on a payslip

Companies that hire under Brazil’s CLT labor law are required to issue a payslip every month, by the fifth business day of the following month.

At a minimum, the document must include:

• Employee and company name

• Reference month

• Base salary

• Earnings (overtime, bonuses, commissions, etc.)

• Deductions (social security, income tax, benefits, others)

• Tax calculation bases

• Net amount payable

• Information on FGTS contributions

The payslip may be provided in physical or digital format, as long as the employee has access and can store it.

What to do if you find an error on the payslip

Payslip errors are relatively common, especially in large companies that use automated payroll systems.

Frequent issues include incorrect social security or income tax calculations, unpaid overtime, missing additional payments, incorrect calculation bases, and unauthorized deductions.

When something seems wrong, the employee should document the issue and contact human resources in writing, requesting correction. If the issue is not resolved, the next step is to seek the labor union or appropriate authorities.

There is a five-year statute of limitations to legally challenge payment errors. Keeping all documents organized is a form of protection.

How to store and organize payslips

Experts recommend keeping all payslips, including those from previous jobs, for at least five years. For retirement purposes, keeping them indefinitely is advisable, as they may serve as evidence if information is missing from social security records.

Best practices include maintaining both physical and digital copies, organized by month and year.

Organization tips:

• Scan or photograph each payslip.

• Store files in cloud services and in a physical folder.

• Keep records for at least five years after the end of employment.

The payslip is one of the most complete forms of income proof. It shows what the worker earned, how much was contributed, and which rights were effectively paid. Keeping it is a way to safeguard the future.

Source: G1