Withholding taxes and issuing regular payments are two of the responsibilities for employees who are on your payroll. Whatever method you use to pay employees (e.g. direct deposit), there’s one thing that you should give employees: a stub. But what exactly is a “pay stub?” What do you see on a stub of pay? Are you required to provide one to your employees or is it unnecessary?
A pay slip, also known by the name “check stub”, is a portion of a paycheck that includes details about the employee’s earnings. It includes the wages earned and the year-to -date payroll information. The check stub shows the employee’s earnings before taxes and deductions. Additionally, a real pay stub displays the actual pay received by the employee (i.e., net salary).
What are the contents of a pay-stub?
Many details are included on a pay statement that can be used to help you and the employee track payments, taxes, deductions, and other information. Pay stubs generally include the following:
Gross wages
Employee taxes
Deductions
Employer contributions
Employer taxes
Net pay
You can see the information below to help you decide what information to include on your pay stub.
Gross wages
Gross wages represent the starting point for your employee’s salary. Gross wages refer to the amount of money you owe an employer before you deduct any taxes and deductions. It is mandatory to include any non-taxable income that an employee earns under gross wages.
How you calculate gross wages for employees depends on whether they work hourly or salaried. Multiply the hourly pay rate of hourly workers by the number hours worked in the pay periods. Divide the worker’s annual salary and the number of pay periods by to determine their gross compensation.
Typically, the pay slip shows gross salary information in two columns. These are current gross pay as well as year-to date gross pay
These information can be added to the gross pay section of a stub for an employee:
Total hours worked: Hourly and nonexempt workers must have the total hours worked on their pay stubs. Nonexempt employees can work different hours, including overtime, regular and double-time. In the check stub, add the total hours spent for each type. You should ensure that every hour worked on your pay stub is recorded. While it is possible for salaried employees to be recorded on their pay slips, this is not mandatory. You should separate the hours worked into the current and year-to -date columns.
Pay rate: The employee’s hourly rate should be included on their pay slip. Notify hourly workers of the employee’s hourly wage rate. Show the salary amount for each pay period worked, if salaried. In addition, you should record on your pay stub the employee’s pay rate for overtime, double-time and similar. worked.
Employee taxes
Gross pay is not paid to employees. Earnings are affected by payroll taxes and other deductions. (We’ll get to them later). Employees can see all taxes withheld from their gross salary on the pay stub.
Standard employee payroll taxes include:
Federal income tax
FICA taxes (Social Security and Medicare taxes), the employee portion
State income tax
Local income tax
State unemployment tax (for Alaskan, New Jersey and Pennsylvania)
Taxes applicable to both the state- and local level
In the pay slip, add a separate line to each tax. Then show the amount withheld during the current year and the previous pay period. Separate the employer and employee taxes on the pay slip.
Deductions
The small business benefits you provide will affect the payroll deductions. A small business employee may contribute to retirement plans and insurance premiums.
Also, deductions can include charitable contributions, loans payments, and other involuntary or voluntary deductions (e.g. support for children). List each deduction on its respective line and show the current and historical totals.
Contributions of employers
Depending on the business you run, there might be line items on employees’ pay stubs that you don’t subtract from their gross pay. These usually include amounts your employer contributes.
You might contribute to:
Health insurance premiums
401(k), Plans
Health savings accounts
Other retirement plans
Each contribution is listed on its own line. Include current and past totals.
Employer taxes
Employers must also pay payroll tax for each employee. Include these taxes in a separate section along with the current and year-to date totals. These are the employer-paid payroll taxes:
Federal unemployment taxes (FUTA tax)
State unemployment taxes (SUTA tax)
FICA taxes are paid by the employer
Find out from your state if there are other taxes that employers must pay.
Net pay
Net pay, also known as take-home or net pay, is the left-over amount after subtracting taxes, deductions, and gross pay. After subtracting taxes and deductions, add nontaxable income received by the employee.
After subtracting taxes or deductions, the take-home pay of an employee is calculated. The total amount you pay your employee is known as the net pay.
Include the pay period net and year-to -date net on the check.
What are the uses of pay stubs
Employers and employees can access the pay stub information.
Employees receive pay slips that are used as records of wages. Employees can examine their pay slips to ensure they are paid correctly and understand deductions.
Employers can use the pay stubs of employees to settle disputes. The payroll stub can be used to help you resolve any question regarding an employee’s salary. Also, check stubs are a great way to fill out employee’s Form W-2 at tax time.
Do I need to give pay stubs my employees?
Pay stubs are required by some states. It is possible to vary the information required on a paycheck statement.
An electronic (e-paystub), as well as a paper, pay stub can be provided to your employees. You might be able to provide employees with online access to pay stubs through payroll software. Each payroll stub should be kept for the employee’s payroll records.
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