About Pay Stub
If an employer has employees on the payroll, then on a regular basis they withhold taxes and issue payments.
And regardless of which way they choose to pay their employees, there is always an item they typically need to give to employees which is a pay stub. Let us look at, what is a paystub?
What all are included in the pay stub? And, whether it is necessary to provide it to their employees?
What Are Pay Stubs?
The pay stubs which are at times also known as a check stub are part of a paycheck.
They are separate document that gives details about the employee’s pay. There is an itemization of the wages earned for the pay period and gives information of year-to-date payroll.
The pay stub also shows taxes and other deductions taken from an employee’s earnings.
A pay stub shows the amount of net income which is the actual amount received by the employee.
What All Are Included In The Pay Stub?
The pay stub has many details which help the employer and their employee to monitor the payments, taxes, and deductions. the general items on a pay stub are:
- The employee’s gross wages
- Their taxes
- The Deductions
- The contributions from the employer
- Employer taxes
- Net income
Let us look and understand what all are included in a pay stub –
What Is A Gross Wage?
Gross wages are the total sum of money the employer owes an employee before they take out any taxes and deductions. If an employee has any nontaxable income, that also gets added under gross wages.
The calculation of the employee’s gross wages depends on whether they are paid hourly or salaried.
In the case of hourly workers, the employer multiplies the employee’s hourly pay rate with the number of hours worked.
For a salaried worker’s gross pay, the employer divides their annual salary by the number of pay periods in the year.
The pay stub gives gross pay information in two columns: current gross pay and year-to-date gross pay
Along with that an employee’s gross pay portion of the stub also includes –
- The total number of hours worked: Pay stubs for hourly and nonexempt salary workers should have the number of hours worked. Nonexempt employees can work regular, overtime, and double-time types of hours. the pay stub should include the total hours for each type of hour. On the pay stub, make sure each kind of hour worked should be on its own line. Salaried employees’ hours may be recorded on their pay stubs, though it’s not mandatory. The hours worked into current and year-to-date columns must be separate.
- Pay rate: The employers should include the employee’s pay rate on their pay stub. For hourly workers, each employee’s hourly pay rate must be noted. In the case of a salaried worker, they need to show the salary amount of pay for the pay period worked. Also, they need to record the employee’s separate pay rate on the pay stub if they have worked overtime, double-time, etc.
- Employee taxes: The gross pay amount is not taken home by the employees. Their earnings get reduced with payroll taxes and other deductions. The taxes are itemized in the pay stub so the employees can see all the tax amounts withheld from their gross pay.
The standard employee payroll taxes included in the pay stubs are:
- On the pay stub, a separate line is created for each tax, showing the amount withheld for the current pay period and year-to-date. The paystub also has separate Federal income tax
- The employee portion of Social Security and Medicare taxes
- State income tax
- Local income tax
- State unemployment tax if they belong to Alaska, New Jersey, and Pennsylvania
- State- and local-specific taxes
- Employee-paid taxes from the employer-paid taxes mentioned.
What Are The Deductions On A Paystub?
The payroll subtractions on a pay stub depend on the small business employee profit provided by the employers. For instance, an employee might contribute to insurance premiums or retirement plans.
Deductions may also include payments toward loans, charitable contributions, and any other voluntary or involuntary deductions like child support.
What Are The Employer Contributions On A Paystub?
Depending on the business, there may be some line items on an employee’s pay stub that an employer doesn’t deduct from the gross pay amount. These generally include amounts they contribute as an employer like:
- Health insurance premiums
- 401(k) plans
- Health savings accounts (HSA)
- Other retirement plans
How Much Is The Employer Taxes?
Each employee receives payroll taxes that are paid by the employer. Which needs to be included in a separate section with current and year-to-date totals. Employer-paid payroll taxes consists of:
Federal unemployment taxes (FUTA tax)
State unemployment taxes (SUTA tax)
The employer portion of FICA tax
The employer must check with their state to see if there are any other employer-paid taxes that must be paid and included on employee pay stubs.
What Is Net pay?
Net pay is the take-home pay, which is the amount that is left after subtracting taxes and deductions from the employee’s gross pay.
If the employee receives nontaxable income, that income should be included after subtracting all taxes and deductions.
What Are Pay Stubs Used For?
A pay stub has information that both the employers and employees can use.
The pay stub is received by employees as records of their wages. By reviewing their pay stubs, they can understand their deductions and make sure if they were paid correctly.
Pay stubs can be used by employers to settle discrepancies with employees’ pay. If there is any query regarding an employee’s pay, the employer might resolve the issue by looking at the pay stub.
The employer can also use pay stubs during tax time to fill out each employee’s Form W2.
An Employee Pays Stub Consists Of The Following Data
- Employee name
- Pay period and date
- Hours worked
- Gross pay
- Deductions
- Taxes
- Employer contributions
- Direct deposit information
- Net pay
Conclusion
A pay stub is a paper document issued by an employer to pay an employee for the services rendered. It is a separate document listing details about the employees’ pay.
Reviewing employee pay stubs consist of pay rates, hours worked, and total earnings.
If there is any discrepancy in the amount, the employer needs to catch errors early so as to avoid conflicts with employees and the IRS penalties.
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