Business

An Extensive Guide on Pay Stubs That Every Small Business Owner Needs

What is a pay stub?

Pay stubs are basically a detailed paycheck. A pay stub enlists the number of hours worked, total wage, and taxes taken out from wage. They are usually attached with paper paychecks, but due to the direct deposit system, they are now stashed somewhere in the business’s payroll software.

The reason why you need to establish pay stubs is that the federal government requires you to keep track of hours worked by your employees and their wages. Apart from that, some businesses ensure that their employees know about the hours they put in work and how they are paid. This type of thing keeps a transparent relationship between the employee and employer. These paystubs can also be used when an employee needs to sign up for a loan from a bank. As for the employer, it is good to generate pay stubs for employees and for the business itself because it will be used to remit payroll taxes. By having a record through pay stubs, you can withhold that amount before paying. 

What should be written on pay stubs?

Now that we know what a pay stub is and how it is important for both the employee and the employer, let’s talk about what should be written on a pay stub. Ideally, any good pay stub should reveal the information regarding an employee’s work hours and his/her earning in any given pay period. Remember that this could be a month-long or a week-long or it could be a project base and can cover the span of 5 or 6 months. The pay period could be long or short. This pay stub will reveal the wage history for both the employee and the employer. 

  • Basics: Mostly the basics are the same as any other document. That includes name, address, and pay period. This makes it easy for people to identify whose pay stub is this. Further information includes the employee’s address, employee ID number, and Social Security Number for more accuracy. 
  • Hours of work: Most of the companies pay hourly wages to their employees so there should be a portion where the number of hours the employee worked should be mentioned. The wage will be calculated accordingly. However, if the nature of the job doesn’t count the number of hours such as any specific project where there is room for more or less work, there is no need to fill the hours in the payroll. A simple price would suffice the whole project details. 
  • Gross pay: Gross pay refers to the employee’s total earnings for that pay period before any payroll deductions. The taxes, insurance plans, and retirement deduction are done from the gross pay accounts. In the gross pay, bonuses, commissions and tips are also counted. 
  • Payroll deductions: Payroll deductions are done everywhere so that should also be stated on the pay stub that employers will take out a portion of their employees’ paychecks for taxation. If the employee has registered for another retirement plan or health insurance, some portion of their gross income will be deducted and should be mentioned on the pay stub.   
  • Net pay: Net pay refers to the amount that will be going into the employee’s hand once the deposit comes through. This amount will be the end product after all sorts of deductions. This amount can be withdrawn from the bank as well. 
  • Vacation and sick time: If you want to keep the pay stub more elaborative, you can add the vacation and sick time if your employee has had any. It will be mentioned in the payroll details but putting it on pay stubs will show how many sick leaves and vacations have been accumulated by the employee during any pay period. 

You can add the details of paid and unpaid leaves here as well and deduct some amount as well. 

How to create pay stubs for your employees?

These days, making pay stubs is very easy. All you need is payroll software and with that, you can make all your payroll services easy. Some of the payroll software are paid while some are free. For an elaborative pay stub, paying a small fee is worth it.  Payroll software can calculate tax withholdings, remits tax payments, required tax filings, and come up with quick analysis reports as well.

The software is cool in a way that if you enter a name, the whole history will come up and you can search anything or add anything.

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