We all love the moment when it’s finally payday. That’s when we receive a paycheck or a direct deposit to the bank account. We receive our salaries as a result of hard work and many hours spent dedicated to completing various tasks. However, a paycheck is also a result of a thorough calculation.
That’s when paystubs come in handy. A pay stub is a document that shows a person’s salary information, including all deductions and the gross wage. However, what other valuable data can you find in this document? Keep reading to learn more.
What Is A Paystub?
So, what is a pay stub? A pay stub corresponds to a paycheck. It is essentially a record of everything that is included in the paycheck. The main distinction between a pay stub and a paycheck is that a pay stub can’t be cashed out, while the paycheck can.
A pay stub is a thorough record of all the sums that go to an employee’s overall compensation. Typically, employees get electronic access to their pay stubs. However, some employers print out and hand these documents to their workers. Nevertheless, employees are entitled to receive these documents if the state or local laws require businesses to provide pay stubs.
It’s worth mentioning that federal law does not require companies to provide pay stubs. However, state and local laws have these recommendations. Typically, business owners can visit official state websites to find guidelines. Moreover, these websites even have free templates of pay stubs that company owners can download and use.
The difficulty is that one must have a PDF editor program to use these templates. A simpler way to generate pay stubs is described further in this article.
Information Included On A Pay Stub
Unlike paychecks, paystubs include much more data than a person’s salary. Here’s what you can find on a standard pay stub:
- Employee data include their name, social security number, and home address.
- Employer information, including the company’s name and address.
- The pay period’s dates (could be anything from one week to a month and even a year).
- Employee wage or salary.
- Gross earnings are profit before taxes, employee contributions, and deductions.
- Employee contributions to retirement programs or pensions.
- Withheld taxes, including federal income tax and, if applicable, state or local income taxes, and the employee’s part of FICA tax (including Medicare and Social Security taxes).
- Deductions for premiums like health insurance or life insurance.
- Net pay. It’s the total salary after subtracting all taxes, contributions, and deductions from gross earnings. So, a salary or wage an employee can use as they wish.
This description may tell you that a pay stub enables employees to see what they earn and how much taxes they pay. It’s a great and transparent way to communicate important data by businesses to their employees.
Should Employers Provide Paystubs?
Although no federal law forces companies to provide pay stubs to employees in the United States, numerous states do. Details of those standards differ from state to state. Thus, contacting state labor offices is critical, especially if your company conducts business in many states.
Even in places where pay stubs are not required, the Fair Labor Standards Act requires businesses to preserve records of employee wages and hours worked, and employees have the right to access the information.
There are a few reasons for businesses to provide pay stubs. Here are a few most worthy of mentioning:
- Easy tax preparation. Business owners must file tax returns every specific period (the period depends on the business model). Thus, they must take care of deductions and reimbursements. One of the main deductions from the income earned by the company that enables the reduction of the tax burden is employee salaries. You can easily calculate all salaries and deduct them from your gross income. Thus, you reduce your taxable income. Since it’s easier to prepare for taxes, you feel relaxed each time you must file your returns.
- Improved employee data recording. You can retrieve any necessary data from pay stubs. Typically, business owners use generators to create pay stubs and receive them in bulk in their mailboxes. Thus, you can use this method and store data electronically and categorize it as you prefer. This method enables you to reduce paper trail and have data available for audits or other purposes.
- Building trust with employees. Offering a clear understanding of how you calculate your employees’ salaries builds trust in the long run. It’s recommended to create and hand over pay stubs to employees even if the state law doesn’t oblige you. You will build trustful relationships with your employees since they know how you pay them.
Moreover, employees, too, benefit from receiving pay stubs. One such benefit is receiving a loan or applying for a mortgage. A pay stub works as proof of income, so an employee can easily get nice conditions for a loan in a bank.
How to Create Pay Stubs?
When a company is new, tiny, or has limited resources, it may be forced to manually handle pay stubs and other payroll tasks. Payrolling in this manner might entail relying on a mess of spreadsheets, paper records, various websites, and so on each pay month or week.
Handling payroll this way may not be a big deal if you have no or a very few employees. Otherwise, it can be a serious and time-consuming task. That is why it is recommended that small firms take advantage of Payroll software to make the job easier.
It becomes increasingly important to use such programs as the business grows. It’s easy and fast to handle paychecks and pay stubs via such software. You may automatically send paychecks and generate pay stubs once the data for each employee is submitted.
If you don’t want to invest in an accounting software program, you may opt for simple pay stub generators. There are a few useful services that you could benefit from. Typically, they cost just a few dollars every period. For instance, a service called Real Check Stubs delivers check stubs for under $9 per pay period.
