What does a pay stub look like?
Regular payments and tax withholding are required when you have workers on payroll. A pay stub is an essential document to provide workers regardless of the method of payment you use (direct deposit, for example). Yet, what exactly is a pay stub? Do you really need to give these to your workers?
An employee’s pay stub, often called a check stub, is a portion of their paycheck or an independent document that records their compensation. It details the payroll statistics for the year thus far and breaks down the earnings earned for the pay period. The pay stub further details the various deductions made from an employee’s salary, including taxes. An employee’s net pay, as shown on their pay stub, is the amount that they really get. It is your responsibility as an employer to be familiar with the process of creating pay stubs.
Pay stubs provide a lot of information that can be useful for both you and your employee in keeping track of payments, deductions, and taxes. A pay stub will typically contain the following information:
- Employee taxes
- Gross wages
- Employer contributions
- Deductions
- Net pay
- Employer taxes
See the breakdown of each section below to see what details should be on a pay stub.
Gross wages
Your employee’s salary will begin with their gross wages. Gross wages are the amount of money that you owe to an employee before there are any deductions or taxes taken out of the total amount. You are required to include an employee’s nontaxable income in their gross payment as well.
The employee’s hourly or salaried status dictates the method for calculating their gross compensation. To calculate the hourly wage of an employee, take their rate of compensation per hour and multiply it by the total number of hours worked within the pay period. Dividing an employee’s yearly compensation by the total number of pay periods in a year yields their gross pay.
There are usually two columns on a pay stub that provide gross pay information: the current column and the year-to-date column.
What follows is an example of what may be on an employee’s pay stub inside the gross pay section:
- Hours worked: Nonexempt salary workers and those paid by the hour must reflect the total number of hours worked on their pay stubs. There are several sorts of hours that nonexempt staff members can work, including normal, overtime, and double time.
Make sure you include the entire number of hours for each type of hour on the pay stub. Be careful to separate the different types of hours worked on the pay stub. It is optional, but not required, to record salaried employees’ hours worked on their pay stubs. Divide the total working hours into two columns: current and up to this point.
- The employee’s pay stub should contain their pay rate. Keep track of the hourly pay rate for each employee. For each pay period worked, document the amount of compensation for any employees who get a salary. On top of that, be sure you include on the pay stub any overtime, double-time, or other special pay rates that an employee may have earned.
Employee taxes
Workers do not get their full gross compensation. Employees have less money coming in after paying taxes and other deductions (more on those later). All of the taxes withheld from an employee’s gross salary are clearly displayed on the pay stub since they are itemized.
Paycheck stubs often include the following payroll taxes:
- Taxes charged by the federal government
- A worker’s share of the FICA tax (Medicare and Social Security taxes)
- Income tax imposed by the state
- Income tax at the municipal level
- State unemployment tax (in Pennsylvania, New Jersey, and Alaska)
- State and municipal taxes
Make a new line on your pay stub for each tax and write down the total amount withheld for this pay period and the whole year. On the pay stub, separate the taxes paid by the employer from the taxes paid by the employee.
Deductions
The deductions shown on a pay stub for small company employees might differ based on the perks you offer. An employee may put money into a retirement plan or insurance premiums, for instance.
Payments made to charity organizations, loans, and any other involuntary or voluntary deductions (such as child support) might also be deductible. Display the current and year-to-date totals for each deduction, and list them on separate lines.
Employer contributions
Some of the lines on a worker’s pay stub may not be subtracted from their gross compensation, depending on your company policy. Usually, they include the sums that you, as the employer, pay.
Perhaps you might help with:
- Premiums for medical coverage
- 401(k) plans
- Accounts for health savings (HSA)
- Various retirement schemes
Separate each contribution and include the amount for the current and total for the year.
Employer taxes
Each employee’s payroll taxes are also the responsibility of the employer. Put the current and year-to-date totals for these taxes in their own area. Included in the payroll taxes that employers pay are:
- Federal unemployment taxes (FUTA tax)
- The employer portion of FICA tax
- State unemployment taxes (SUTA tax)
If you’re an employer and want to know what additional taxes your employees’ pay stubs need to contain, you should contact your state.
Net pay
After deducting taxes and other deductions from an employee’s gross pay, the remaining amount is their net pay, sometimes called take-home pay. After deducting all taxes and deductions, add any income that is not taxable to the employee.
You get the employee’s net salary after you deduct their taxes and other deductions. Your overall payment to the worker is known as their net pay.
On the check stub, write down both the net pay for the pay period and the net pay for the year thus far.
Why do people use pay stubs?
Employers and workers alike can benefit from the data included in pay stubs.
Workers may keep track of their earnings with the help of pay stubs. It is the employee’s responsibility to examine his or her pay stubs to verify accuracy and comprehend deductions.
Pay stubs are a tool that employers can utilize to resolve employee pay disputes. It may be necessary to review the paycheck stub in order to resolve any concerns regarding an employee’s compensation. At tax time, you can also use employees’ check stubs to complete their Form W-2.
Do I need to give my workers pay stubs?
Pay stubs are required by law in some states. Also, states may have different requirements for what data must be included on a paycheck stub.
You have the option of providing your employees with either paper pay stubs or electronic ones. It is possible to provide employees with online access to their pay stubs through a portal if you utilize payroll software. To keep track of employee payroll information, be sure to retain a duplicate of each stub.
Check with your state’s official website for details on what kind of pay stubs are required.
Example of a pay stub
Now you’re good to go when it comes to filling out a pay stub. On the other hand, you could be thinking, “What does a pay stub generally look like?””
Pay stubs for employees include the following information:
- Name of employee
- Date of pay and period
- Working hours
- Gross pay
- Taxes
- Deductions
- Employer contributions
- Details of the direct deposit
- Net pay
Understanding the data shown on pay stubs
You and your company can benefit from a better understanding of the data included on pay stubs. It is expected that you are familiar with the process of creating and understanding employee pay stubs.
Paying an employee promptly may be necessary in the event of their resignation or termination. Having information from pay stubs at your disposal makes the procedure more streamlined. The time it takes to verify correctness and pay employees is directly proportional to your familiarity with the components of a pay stub.
It is possible to find errors while reviewing employee pay stubs. Examine each pay stub to ensure that the total earnings, hours worked, and pay rates are accurate. Recognizing mistakes early can help you avoid IRS fines and confrontations with employees, especially if a sum looks excessively high or low.
