creating employee pay stubs

Pay Stub Generation 101: Essential Tips for Creating Employee Pay Stubs

Every company, be it an enterprise or a startup, has to pay its employees. The employees’ net salary is calculated after factoring in taxes and various deductions from the gross pay. 

Both employers and employees must be aware of the information on a pay stub. While it is the duty of an employer to generate pay stubs accurately by calculating tax withholdings and other deductions, employees should also be aware of the various deductions that have been made to calculate their net pay.

In this blog, we will learn about pay stubs, their importance, and things you should be aware of before creating pay stubs for your employees.

  • What is a pay stub?
  • Are pay stubs the same as pay statements?
  • Are pay stubs important?
  • Are pay stubs required by law?
  • Can pay stubs be used as proof of income?
  • How does a pay stub look?
  • How to create a pay stub?
  • Key takeaways

What is a pay stub?

A pay stub, also known as a paycheck stub, salary slip, pay slip, or wage statement, is proof of income provided to employees while paying their wages. 

To go for a perfect definition, it is a periodic record of how much an organization pays to an employee in a select period, after calculating taxes and various deductions from their gross pay. Details included in pay stubs are the salary paid to an employee, all kinds of taxes paid, and deductions removed.

For a person who is employed by an organization, it is the responsibility of an employer to generate a pay stub and provide it to that person—be it a salaried employee or a contractor.

Are pay stubs the same as pay statements?

Let us break it for you.

Both a pay stub and a pay statement are the same. Both provide details of the pay provided to employees each pay period—semiweekly, weekly, biweekly, semimonthly, or monthly.

A pay stub or a pay statement outlines the details of how much an employee earned in gross pay, what taxes were paid, and what deductions were made, leaving them with a net pay amount.

Are pay stubs important?

Definitely yes!

Pay stubs serve as proof of documentation and it is extremely important for companies to keep records of their employees’ pay stubs. It also ensures transparency in the calculation of pay dispensed to employees and contractors.

By maintaining proper pay stub records, companies need not worry about any legal repercussions or financial implications.

Employees who receive pay stubs as a record of their pay can understand the taxes and deductions made to their salary. Verifying these details at the time of payout infuses good ethics with the company.

Also, they can utilize pay stubs as proof of employment in circumstances such as applying for a loan and renting an apartment. 

On the other hand, employers can save themselves from the trouble of payroll-related queries by providing their employees with accurate pay stubs. In addition, maintaining all the employees’ pay stubs makes it easy for employers to fill out Form W-2 for each employee and report it to the Internal Revenue Service (IRS) at the end of the year.

Speaking of W-2, there’s this one question that is frequently asked by employees to their employers.

Is my pay stub the same as W-2?

The answer is no. Form W-2 is not the same as a pay stub.

A W-2 form, also known as a Wage and Tax Statement shows a summary of taxable earnings an employee received for the calendar year, whereas a pay stub will show the total or gross earnings an employee received in a pay period.

Overall, a pay stub is an important document for both employers and employees.

Are pay stubs required by law?

Providing employees with their pay stubs is an important part of the payroll process. But one might wonder if employers really have to provide pay stubs.

The answer to this depends on where your business is operating.

Also, to know whether you are bound to provide pay stubs to your employees, you need to be aware of federal and state laws.

Speaking of the federal government, there’s no such law that requires employers to provide pay stubs to employees. However, the Fair Labor Standards Act (FLSA) and the Age Discrimination in Employment Act (ADEA) make it mandatory for employers to keep the records of their employees’ pay stubs for at least three years.

This includes a record of each employee’s hourly wages and salary received. Along with payroll records, the employers must also preserve records showing wage rates, job evaluations, seniority, and merit system.

For the state government, it’s a bit tricky. As every state has different legal requirements for pay stubs, it is the duty of the employer to familiarize themselves with the pay stub requirement of the state from where their business operates.

Suppose your company is located in California state, it is mandatory that employers provide written or printed pay stubs to their employees.

The bottom line is that states vary in their pay stubs requirements, but it is the responsibility of the employers to maintain the payroll documentation and show it whenever asked.

Pay stubs as proof of income

Employees use pay stubs as proof of income in multiple circumstances, and it’s the employer’s responsibility to provide their employees with accurate pay stubs every time the salary is paid.

For instance, if an employee is switching over to a new company and they request the employee to submit pay stubs from the previous company. Here the pay stubs act as proof of income and employment.

Employees can also use pay stubs as proof of income while availing of a home or car loan, as banks will want proof of income. 

How does a pay stub look?

Pay stubs generally contain information about both the employee (basic details such as name, social security number (SSN), and address) and the employer (name, employer identification number (EIN), and address). Each pay stub differs based on the business sector and state employment laws.

We have listed some of the common components found in an employee pay stub.

  • Business Information
  • Employee Information
  • Pay Period/Pay Date
  • Work Hours and Earnings
  • Taxes
  • Other Withholdings
  • Net Earnings

Here’s an example of what an excellent pay stub looks like:

How does a pay stub look?

Key takeaways

  • A pay stub contains three main sections you must be aware of—how much an employee is being paid, taxes deducted from the gross pay, and any other deductions that are being made.
  • Both employers and employees should have a clear understanding of what a pay stub is and what purpose it serves them.
  • Employers are required to maintain a record of their employees’ pay stubs.
  • Stay updated with the current tax law changes and requirements to stay tax compliant.

Create pay stubs with SecurePayStubs

After you get a clear understanding of what a pay stub is, the next question arises—how to create a pay stub for employees?

Whether you run a big corporation or a small business, there are going to be quite a few employees, and it is a humongous task to make pay stubs individually for every one of them. Also, to complete the payroll process and create pay stubs for employees smoothly, employers must have all the necessary information handy.

This can be both time-consuming and prone to human errors.

A smart online paystub generator such as SecurePayStubs helps you create some of the finest pay stubs without putting in much effort!

SecurePayStubs is an intuitive online pay stub generator that lets you create professional pay stubs in minutes; right from calculating taxes (both federal and state taxes) accurately to generating your employees’ pay stubs securely. It also offers a library of free pay stub templates to customize your pay stubs.

SecurePayStubs makes sure the deductions and tax withholdings are calculated based on the current tax laws and requirements, thereby leaving room for no errors.

Let SecurePayStubs take care of generating pay stubs for your employers and contractors securely while you focus more on your business growth.

Give it a try and experience how simple it is to create pay stubs!

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