As an Employer, you need to know what information is required when calculating the paycheck for your employee. This helps in determining any errors you might face when filling the actual paycheck.
What is a Pay Stub?
What are Paystubs used for?
A pay stub includes information both employers and employees can use. Employees receive pay stubs as records of their wages. By reviewing their pay stubs, employees can make sure they were paid correctly and understand their deductions. Employers can use pay stubs to settle discrepancies with employee pay. If there is a question about an employee’s pay, you might need to solve the issue by looking at the payroll pay stub. You can also use pay stubs to fill out each employee’s Form W-2 during tax time.
What information is included in a Paystub?
There are many details included on a pay stub to
help you and your employee keep track of payments and deductions. Generally,
the items on a pay stub can be broken down into three parts:
1. Gross wages
2. Taxes, deductions, and contributions
3. Net pay
To understand what information is included in a pay stub, take a look at each category below
– Gross wages
Gross wages are the starting point of your employee’s pay. Gross wages are the total amount paid during a period by an employer to an employee prior to any withholdings, taxes, and deductions. This amount depends on employment type (full-time or part-time), and Earning Rate (salary or hourly). After Deductions, such as Taxes, the amount comes down to the actual pay disbursed. This is called the Net Pay.
An employee’s gross pay is included on their pay stub. Gross Pay is divided into two sections; the current gross pay, or information for the pay period and year-to-date (YTD) totals. The following items are included in an employee’s PayStub.
Hours worked: Pay stubs for hourly workers include the number of hours worked. Salary workers can also have the hours worked recorded on their pay stubs.
Nonexempt employees can work different types of hours, such as regular, overtime, and double-time. On the pay stub, put each kind of hour worked on its own line. Separate the hours worked into current and year-to-date columns.
Pay rate: The pay rate or the hourly rate is included in an employee’s pay stub. In the case of a salaried worker, you can show the amount of pay they are due for the pay period worked. Also, record an employee’s increased pay rate on the pay stub for any overtime or double-time worked.
Gross pay: A pay stub lists the total wages earned before deductions. Besides regular wages, an employee might earn additional income. This can include overtime, sick pay, holiday pay, bonuses, personal time, and payroll advances. On the payroll pay stub, you can calculate your Gross Pay by including everything in your take away home income.
– Taxes, deductions, and contributions
Employees do not take home their gross pay. Payroll taxes and other deductions reduce their earnings. The pay stub itemizes deductions so that employees can see amounts taken from their gross pay.
Like gross pay, taxes and deductions are separated into two categories. One category shows current deductions, and the other shows year-to-date (YTD) amounts. The following are common deductions found on pay stubs.
Employee tax deductions: Usually, government agencies (like the IRS and state tax departments) tax an employee’s pay. Common taxes deducted include federal income tax, the employee portion of FICA tax, and, sometimes, state and local income taxes. On the pay stub, create a separate line for each tax and show the amount deducted for the current pay period and year-to-date.
Benefits and other deductions: Other payroll deductions shown on a pay stub vary depending on the small business employee benefits you provide.For example, an employee might contribute to insurance premiums or retirement plans. Deductions could also include charitable contributions, payments toward loans, and any other voluntary deductions. List each deduction on its own line,and show current and year-to-date totals.
Employer contributions: Some items included in an employee’s pay stub are not deducted from the gross pay. They reflect amounts you contribute as an employer. For example, you pay taxes such as FUTA tax, SUTA tax, and the employer portion of FICA tax. You might also contribute to employee benefits, like insurance premiums and small business retirement plans. Each contribution should be listed on its own line.
– Net pay
Net pay is the amount left over after subtracting deductions from the gross pay. It is the employee’s take home pay. The net pay is the amount you write on the employee’s paycheck or direct deposit into their bank account. The pay stub records net pay. You can find both the current net pay for the pay period and the year-to-date net pay.
Since the payroll pay stub itemizes earnings and deductions, you can easily check for accuracy. If an employee doesn’t understand their pay, explain each part of their pay stub.
– Pay stub example
Now you know what information is included in a pay stub. But, you might be wondering, “What does a pay stub look like?” Below is an example of a pay stub. Take note of the parts of an employee pay stub:
• Employee name
• Pay period and date
• Hours worked
• Gross pay
• Employer contributions
• Direct deposit information
• Net pay
– Understanding Pay Stub Information
As a business owner, you don’t receive a pay stub like your employees do. But, understanding information on a pay stub solves several issues for you and your business. You should know how to create and decipher an employee pay stub.
If an employee suddenly quits or is fired, you might need to pay them quickly. Knowing pay stub information makes the process smoother. The more familiar you are with the parts of a pay stub, the faster you can check for accuracy and pay the employee. Reviewing employee pay stubs can also bring mistakes to your attention. Check for correct pay rates, hours worked, and total earnings. If an amount seems unusually high or low, you can catch errors early to avoid IRS penalties and conflicts with employees.
You can generate and print employee pay stubs today! Try it Now!