Overview of a paystub
A paystub, also known as a check stub, salary slip, or pay slip, is proof of income for an employed individual for a specific period. Many institutions across the country require individuals to produce a paystub as proof of stable employment. This may leave one wondering how to make a paystub. For people who are employed by organizations or companies, it is the responsibility of the employer to generate and give the paystub to the employee.
Who needs paystubs?
Employers create a payroll check stub for their employees, as the United States require all the firms across its states to file and issue paystubs. The total amount of all paystubs is used to compare wages, expenses, and labour records of the employer. Paystubs are used as a tallying tool for accounting records for employers.
When an individual is self-employed, they need not worry about how to create a paystub. The benefits of the paystub for an employee can be
- Record keeping
- Employees need to submit their paystubs as proof of income on various occasions. Take for example – applying for a loan where this document becomes a key evaluating criteria
- It is proof of employment and the amount of salary drawn.
- Paystubs are proofs of taxes paid by an individual and also can be used as a reference for the next tax cycle.
It may seem that a self-employed individual may not need a paystub. This is not entirely true. The paystub might be a prerequisite in many places like applying for loans.
Self-employed individuals need to keep their personal and business expense records separate. If this is not done, it can come in the way of filing taxes. It is important to show the right business profit to be able to compute taxes accurately.
Many banks and self-employed individuals will require to submit their paystubs as proof of income. They may be as follows:
- Corporations: Both small and large corporations of all types
- People who may be doing small but important jobs – plumbers, carpenters, tree service firms, landscapers
- Entrepreneurial firms
How to make paystubs for employees?
After understanding what a paystub is, the next question arises – how to create a paystub for employees? When a company owns many employees, it is a herculean task to make the paystubs individually for all of them.
- There is a variety of free or economical online tools available to assist business owners to make check stubs. One has to ensure that the software being used displays the information for the employees and staff.
- Also, the web has great websites that provide templates to make a payroll check stub for the employees. It is best to conduct in-depth research on which template suits one’s business’s needs the best. After narrowing down on the best template choice, the next step remains to fill in the information accurately. This answers the question of how to create a paystub.
How to make check stubs online?
With advanced software ruling the roost in almost all sectors, employers are also replacing traditional accounting services with paystub generator software. Employees and independent contractors are also using this straightforward system to fulfil their need to make a paystub. The information that goes into creating a payroll check stub may vary from state to state.
The information posted in the how to create a check stub is as under:
- Contact information of the employer- company name, detailed address, contact number, and Employer Identification Number
- Contact information of the employee- name, place of residence, Taxpayer Identification Number, Social Security Number, or Individual Taxpayer Identification Number
- Hourly wages of the employee- rates could differ during night shifts and holidays
- Total number of hours worked
- Total number of overtime hours put in
- Paid time off
- Bonuses received for the work during the period of the pay stub
- Gross wages of the employee which will include the amount of money before tax deductions
- List of tax deductions- state, federal, local, Medicare, Social Security, FICA taxes, and employee benefits
- Provision for back pay wages in case any error occurred in the past leading to less payout
- Net wages- the amount left after the tax deductions and other contributions
This process is time-saving. Software for Paystub creations calculates the taxes based on the state one is employed in and withholds the amounts accordingly. They also calculate the gross, net, and year-to-date balance for the present day period.
Here are additional specifics on some significant paystub workings:
Gross wages are wages earned before any deductions are made. Gross wages are calculated in the following ways
- Salaried employees: (Annual salary/number of pay periods in a year)
- Hourly employees: (Hours worked X pay rate per hour)
Gross wages may contain other reimbursements, like sick pay, holiday pay, or bonuses.
Pay rate for the number of hours worked
The number of hours put in at work is particularly important for employees who work on per hour basis. The pay stub should include up to 40 hours per week and the time spent in overtime.
The pay stub must detail all
- Number of hours worked
- Rate of pay earned for every hour
- This will also include workers under the union contracts. They must be paid a pre-decided rate for overtime
Salaried workers may also see the number of hours listed on their paystubs.
When an employer considers how to create a paystub tax deduction for employee wage calculations are most important. This is important information while filing taxes with a paystub.
- Employees define their federal income tax contribution by filing Form W-4. Every state has a tax withholding form.
- FICA tax is collected to deposit to the Social Security and Medicare
- Employers also pay 7.65% as a business expense. This information is also included in the paystub.
Employees are expected to pay their share of the insurance premiums for company-provided health insurance. Some companies may have the option of a retirement plan, such as a 401(k) plan. 401(k) and the employee have an option to contribute to it with pre-tax dollars, and the employer may add equal contributions.
Taxes for the unemployed
Unemployment programs fall under the FUTA tax (federal) and the SUTA tax (state). These amounts are shown on the paystub and are paid by the employer.
Net pay is the final amount paid to the employee, after all, deductions.
Avoid the most commonly made mistakes while creating a paystub
Providing incomplete or incorrect information
As simple as the task of punching in information in a form can be, one can end up making mistakes. One such mistake is putting incorrect and/or inaccurate data in the stub. More often than not businesses do not list the date of payment or pay period. Also, the contact information of the employer or the employee is missing many times. Silly errors if made defy the purpose of making one’s own check stubs.
While calculating the total hours worked, one can make a silly mistake by incorrectly stating the number of hours an employee has put in during a pay period. To avoid this mistake it is the best practice to use automated software to make check stubs online. Automation is the way to walk past these mistakes.
Discarding the paystub
Often, employees don’t preserve the current paystub and keep it. They do not pay attention to the details of the paystubs. One must preserve the paystub at least till the end of the tax year. One can make w2 from paystub as well. This also helps the employees in identifying whether the employer has been making the right tax deductions on their behalf.
The threat of a fake paystub
Fake paystubs can create problems for businesses. Many times a fake paystub is used by a dishonest individual as proof of income to be eligible for a larger loan amount.
If one owns a financial institution or is in the business of lending money, it is always a good practice to cross-check the contents of the stub. This helps in determining the authenticity of the document. The next best thing to do in this case is to call the employer to cross-check the authenticity of the information provided including the applicant.
State requirements for paystubs
The federal government does not have a uniform paystub law. However, the Fair Labor Standards Act mandates employers to “keep employee pay and time records”. Every state’s Department of Labor website determines the paystub rules for that particular state.
The first step is to verify if one falls in an opt-out or opt-in state:
A business needs to take prior consent from the employee before making the paystub information. In case the employee refuses to give consent then the employer has to stick to the old method. The opt-out states are as under:
- South Dakota
The business in these states must offer a printed version of the pay stub. If the employee chooses to receive pay stubs electronically, the paper version is not required. Here are most of the opt-out states:
- New Mexico
- North Carolina
States with complex rules:
Few states have their own unique rules. Their rules are more complex than simple opt-in and opt-out
Determine the requirements for the specific state that the business operates in.
- No requirements: few states don’t have any rules for paystubs.
- Access states: In these states, one can provide an electronic or paper version as per the request of the employee. Here the employees should have access to printing the paystub or finding it online easily
If a business is operating in multiple states, one may have to adhere to various requirements.
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Multiplier assists you in spending less time on the administrative tasks of employee payroll and more time on attracting and retaining top talent around the globe. Our intuitive pay stub generator lets you promptly and proficiently create paystubs.