If you own a business or run a business, you know that keeping track of payroll responsibilities can be both overwhelming and time-consuming.
Of course, accuracy is of utmost importance. You want to make sure your employees get paid the correct wage and salary. But you also want to make sure you are getting all those deductions correct. Nobody wants a surprise tax bill at the end of the year.
While your state might not require employment pay stubs, they are a great idea for a few reasons. The pay stub helps to keep your records organized and accurate. It also provides the exact information your employees need about all things related to their pay.
Read on to learn about what you need to know about making a pay stub for your employees.
Importance of Pay Stubs
Pay stubs are important for both you as an employer and for your employee.
Your employee can look at their pay stuff information and know exactly what they made over a pay period. They might have expected a higher paycheck. But they can look and see exactly the breakdown of how their pay was distributed.
Employees might also on occasion need proof of employment or their pay if they are renting, buying a house, or buying a car. The pay stub acts as information. It can also assist your employees when tax time arrives.
For you as an employer, it forces you to create records of pay, taxes, and other deductions. This is where using a pay stubcreator is so beneficial. You enter the data and the pay stub’s created, benefitting both you and your employees.
What Should Be Included on the Pay Stub?
Pay stubs can vary slightly from company to company and state to state. Yet, there are a few things that are almost always included on a pay stub.
Employee and Employer Information
The pay stub usually starts with some contact information. The employer will want to include the company name and maybe even branch information of where the employee works.
Depending on the size of the business, the employer will put the address of the business or the address of the human resources department.
There will also be employee information included too. This will include the employee’s name, address, and an employee ID number if the company uses them.
Often this section will include the pay period information. This is the beginning and end date that this payment represents. There should also be the actual pay date.
Gross Pay
The next thing is the gross pay included for this pay period. Gross pay is the total amount of the pay the employee earned before any deductions.
If the employee works based on a salary, the number of pay periods is divided into the whole salary to get the gross pay for that pay period.
If any employee is an hourly employee, then the number of hours worked during the pay period is multiplied by their hourly rate.
Gross pay will also include any bonuses received during the pay period or any commissions too. Occasionally, you will have an employee who takes unpaid time off, so that would need to be deducted.
The gross pay total shows what the employee has earned during that pay period. Of course, they don’t actually get that amount to take home since the deductions need to be subtracted.
Deductions
There are a variety of deductions that might be subtracted from the gross pay.
The employer will first need to deduct federal, state, and local taxes. As an employer, you will look at the federal charts that tell you how much to deduct based on wages and the number of claimed deductions.
You know how many deductions your employee wants to claim from their W-2 form.
The employer must also deduct FICA and Medicare taxes. The employer takes the wages from the pay period and multiplies them by 6.2% for Social Security and 1.45% for Medicare.
This number is then also deducted from the gross pay.
If the employee participates in a 401K plan, retirement plan, those costs, and donations would be subtracted from the gross pay too.
Often employees are responsible for paying for part of their health insurance. This would also be subtracted from the total gross pay.
Employees can also opt to make charitable donations through their work payroll. Maybe an employee has opted to donate a set amount for each pay period to a charity supported by the business.
Because this amount’s taken from their overall gross pay, it is also listed in the deductions section.
Net Pay
The net pay is the actual amount the employees get to take home or deposit to their bank for the pay period.
It is the gross pay minus all deductions. This is the number all workers quickly look to when they open their paycheck. It’s the ‘how much I made’ number.
Other Information
Often employers make contributions on behalf of the employee. So, for example, if the employee participates in the company 401k program. They decide what percentage they want to be put in their 401K which shows up in the deductions.
Often though companies will offer matching funds. This would show the contributions the company made on behalf of the employee.
There might also be vacation time, sick time, or paid time off listed on the paystub.
Employment Pay Stubs Made Easy
A pay stub contains a whole bunch of numbers and accuracy is paramount to success in the payroll department.
When a company decides to use a pay stub creator, it makes payroll time a breeze. The pay stub is already set up in the program with the boxes you need. It’s only a matter of the data entry of the numbers.
Consider using a pay stub creator to handle your employment pay stubs and payday needs.