Any employer needs to provide regular paystubs along with their paychecks to employees. This is essential for tracking things like taxation and income, but it can be a frustrating and time-consuming thing to keep track of, particularly if you have a large number of employees. One option is to partner with a dedicated payroll company, but this can be expensive. Instead, you can use HR paystub generator software to create paystubs for you, making it far easier to fill out all the information you need for your employees. Working out the info you need to include can be difficult, though. Fortunately, we have put together a guide to the basics to help you. Below, you will find a rundown of the basic information you will need to put together for a pay stub.
What is a Pay Stub?
A pay stub, otherwise known as a paycheck stub, is a document that accompanies a paycheck, containing a selection of important information about the recipient’s salary and earnings. A pay stub must be attached to each paycheck, either digitally or physically.
Employees can use a pay stub to break down and fully understand their take-home and net pay, including any deductions. Moreover, pay stubs offer a lot of insight into the numbers contained within an employee’s federal income tax return. Pay stubs also provide proof of income for things like apartment leasing or loans, as well as helping you to keep track of company finances for tax reasons or any other practical purposes.
What Information Do You Need to Include On A Paystub?
There are several different areas of information surrounding employee pay, from personal information to wages to deductions, and including these on your paystubs is essential. When you create a pay stub, you need to make sure all of the following areas of information are fully present on the stub. If you use paystub generation software to create a pay stub, all of this information should be laid out for you very easily, but if you intend to do it all manually, it could take a bit more work.
The first thing that needs to be included on any payslip stub is basic identifying information. That means that you need information such as the name and address of the employee who will receive the pay stub, as well as matching information to identify the employer, including company name and registered address. All of this information should be collected and filed before the employee starts work or at the latest on their first working day.
The gross wages, otherwise known as gross income, of an employee, are their total pre-tax wages. That means all of the money they are earning before any deductions for things like income tax, pension contributions, or other forms of tax are removed from their pay.
Gross wages are calculated differently for hourly workers and salaried workers, but both are simple. An hourly employee’s gross wages are calculated by multiplying their hourly pay by the number of hours they worked in the pay period. Salaried workers are done the other way round, by dividing their annual salary by the number of pay periods in the year. Gross wages should show how this number is calculated, although some states may require additional information, such as overtime payments or time off accumulated such as vacations and sick time.
Gross pay is how much your employees are earning in total, but it is not actually their take-home pay for any given period. There are several major deductions that are removed from any employee’s wages before they receive any pay, and these deductions need to be included on their pay stubs in full. The employer is fully responsible for withholding taxes, so this needs to be done carefully and reliably.
There are several different deductions possible, and not all of them will apply. You should check your state’s employment laws to find out which deductions apply to employees in your area. The most common are as follows: income tax deductions (including withholdings for federal, state, and local taxes), employee benefits deductions (for things like retirement savings, pensions, life insurance, or health insurance contributions), voluntary deductions (for charitable contributions and similar tax-exempt activities), and involuntary deductions (these are rarer, and cover things such as child support payments).
There are a number of contributions an employer is required to make for employees, such as the employer portion of the Federal Insurance Contributions Act tax. There are also a few voluntary contributions you can make, such as contributing to the insurance premiums of your employees or their retirement or savings plans. These contributions can be included on pay stubs, although they are not deducted from wages. This is less vital than most of the features listed above, but it can make it much easier for both the employee and employer to keep track of their finances.
The final piece of essential information for a pay stub is the big central number: the net pay the employee gets to take home for the pay period in question. Known as net pay or take-home pay, this is the amount of money that the recipient actually gets to take home after all of the taxes and deductions have been removed. Pay stubs should show both the net pay for the pay period in question and the Year To Date total net pay. This is the single most important number for a pay stub, and it is the one everyone cares about the most.
Pay stubs are an essential part of running the payroll for a business, and understanding the information that needs to go on pay stubs is an important task. It can be a frustrating and time-consuming thing to wrap your head around, but the guide above should give you a sense of what information you are going to need to have available in order to create a paystub properly. It might look intimidating, to begin with, but after you have got a bit of experience with paystub generation software, it will become a much faster and easier process than you might have expected!
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