What is a pay stub?
A pay stub, also known as payslip, is a document that shows a breakdown of an employee's paycheck in a pay period. It can be viewed on paper, online, or both. Employees should have copies or should be able to request for copies of their pay stubs to document their finances for various purposes. They can use it for their tax return computation, pension contribution evidence, proof of income for mortgage or loan application and many more.
Since the beginning of the digital age, more and more employers are shifting to pay stubs online. This is more convenient for big businesses or enterprises and for companies offering remote jobs because going paperless is more cost-effective and environmentally friendly.
You can opt to create your own pay stub. If you are well-versed in Microsoft Excel or Google Sheets, you can make an automatic and fillable pay stub by assigning formulas on necessary cells. If you need a guide, search for a free pay stub template online and work your way into creating something unique for the branding of your company. There are fillable pay stub free to use, too. As long as you have the data needed for each employee, simply fill the blanks with the right information and it should automatically calculate down to the net pay. Although most free pay stub generators have limitations that will lead you to their paid services. You may find that the free ones often have their branding visible across your stub and have a limited number of pay stubs to generate per day. You might want to try a paid service. Most of them have free-trials so employers can assess if the cost and efficiency suit their businesses well. Pay stubs online may also be packaged with services that could track time, run payroll, pay taxes, and deposit money. See if you need all these for your business.
What should be in a pay stub?
Employee’s Personal Information
An individual pay stub should contain an employee’s unique identification like his or her name, employee ID number, and government ID number(s). For confidentiality, some pay stubs online don’t show these information unless downloaded. Also the owner of the pay stub and the payroll admin are the only ones who can access the file online.
Employee Payment Type
An employee could either be paid hourly or salary. An hourly employee is self explanatory- he or she is paid per hour. A salaried employee on the other hand is paid in fixed amounts. The employer and employee should agree on an annual rate which is then divided by the number of paychecks he or she should get in a year excluding special payouts.
There may be special cases for consultants who already have a rate that they decide on and you can check their websites for that information.
The state where the employees live and work should be indicated on their pay stubs so pay stub generators calculate and withhold the right amount of state taxes per paycheck. If your employees live and work in the same state, this is just one or two clicks away to the next thing to fill out. Employers that offer remote work or are located in borders have a little more research to do. They need to check if the state where an employee works has a reciprocal agreement with the state where that employee lives so he or she will be exempted to paying taxes in one of the states. There are some states that don’t offer this; please consult your accountant and the Internal Revenue Service (IRS) regarding this matter.
Each state has different tax rates, tax types and other contributions. For example, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming don’t have income tax, or only employers are required to pay State Unemployment Insurance (SUI), but if your company is based in Alaska, New Jersey, or Pennsylvania, your employees may be subject to pay SUI.
Pay period varies for every employee. Depending on their contract, they could be paid weekly, bi-weekly, semi-monthly, or monthly and these tell you how many paychecks employees receive annually. Note that special payouts are not included in the summary below.
- Weekly = 52 paychecks
- Bi-weekly (every other week) = 26 paychecks
- Semi-monthly (twice a month) = 24 paychecks
- Monthly = 12 paychecks
The paycheck date is very important. For smaller businesses or special payouts, paycheck dates are also the same as the end of a pay period, this mostly happens on weekly payment schedules. Most of the time, employers pay their employees a few days after a pay period. There are also cases that end-of-the-year pay periods are given in the first week of January the next year. This may seem like your last year’s expense because your employees worked for it that year, but you will be paying your employees and your liabilities based on your paycheck date so it makes a lot of sense to account for it in the same year. Take note that this affects your federal and state forms and your reports.
The same goes with your quarterly reports and payments. If your company is following the standard fiscal quarter, quarter one should account January to March, quarter two for April to June, quarter three for July to September, and quarter four for October to December. Let’s say for the pay period ending March 31, your check date is April 2, this payroll expense and liabilities will be accounted for in the second quarter already.
You get your gross pay by multiplying your employee’s hourly rate to the number of hours he or she had worked on a pay period. For salary employees, their annual rate is divided by their payment frequency in a year. You also include your overtime and double rate pays on your gross salary. Most salary employees don’t get overtime pay unless it’s reached a certain amount of time. Check with your accountant and the law for this matter. Other additional payroll items are commissions, bonuses, tips, vacation pay and car allowance.
The gross salary is still subject to tax and other contributions. Therefore, it is not the amount an employee brings home.
Deductions are taxes and contributions withheld from your employee’s pay. Depending on the state your company is based and/or your employees reside, taxes are withheld in different rates. Make sure you consult with the IRS to avoid penalties.
This is the total amount of an employee’s salary after the deductions per paycheck; their individual net pay reflected on their respected pay stubs is what they take home.
Your year-to-date (YTD) is as important as any other items found on a pay stub. This totals the amount up to a paycheck date per payroll items. You may wonder why some taxes and contributions are not being withheld anymore. This is because some taxes have annual limits and shall restart the next year. This also helps you track if you are over paying your employees and tax agencies.
Why do you need pay stubs for your business?
Having a record of your payroll expenses helps you track your expenses, pay liabilities on time, avoid getting penalties and file your government forms accordingly. Providing your employees a breakdown of their pay helps them understand the worth of their jobs, their contribution, and their finances in general.
How should your pay stub look?
Your pay stub should contain at least the information mentioned above. There is no right or wrong way to arrange it as long as it is easy to read and understand. You can find a free pay stub template online to guide you if you are not too comfortable putting your employee’s data on the internet yet especially when it’s free. Paid sites that can let your employees view their pay stubs are secured and private; you can customize who can view it, but it’s mostly only that specific worker and the payroll admin.
The overall presentation should be nothing fancy. Adding the name and logo of your company will do the work, but putting a little color on your pay stubs won’t hurt especially when the color scheme you are using matches your branding.
It’s under most state laws that employers should issue pay stubs to their employees. Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Ohio, South Dakota, and Tennessee don’t require employers to do so, but most of your employees will request for it. It is a good practice and impression to provide them with a document to track their finances, pay their individual taxes, check their contributions, apply for loans, and many more.
As an employer, this helps you see, explain, and correct discrepancies if your employees complain about their deductions. Always check every item on your pay stub before printing their paychecks or depositing their pay on their bank accounts and printing their payslips. Correcting or reversing their payment may cost you a lot more than double checking your each stub.
And rather than printing them one by one, an online option saves a lot more paper and effort. Find a trusted site that can generate pay stubs and see if their other packages and services suit your business’ financials.
If you’d like to know more about how your online business can be better supported through these kinds of online services, you can talk to one of our Strikingly Happiness Offers for help. If you have a working business webpage - or looking to make one with your team, you can make one with Strikingly today.