What to Include in Pay Stubs
Pay stubs are very important, and getting them right is a very crucial part of keeping your business operations legitimate and out of trouble. While different states have different laws about how you need to handle the stubs themselves, including the right information is always the first step. With more advanced software’s these day it is very easy to generate pay stubs online .
If you are just starting out with creating your own pay stubs, then here is everything you should consider – and some of the ways that you can make it easier for your company to produce pay stubs in large quantities. The better you handle your pay stubs, the easier it becomes to rely on them in the future.
What is a Pay Stub?
If you are not already aware of what they are and what they are for, then knowing the basics of a pay stub can be important. They are essentially a visual representation of an employee’s earnings: a pay check that lists their gross income, deductions, and total net income.
Pay stubs are meant for both your business and your employees. They provide proof of income for employees who are loaning a car or leasing an apartment but also act as an easy way to check over your own financial situation if an employee claims to have been paid less than they have earned.
They are also strong finance records, giving you a full breakdown of how much each employee earned and was paid. They have an entire spectrum of different uses, but they are more or less required in all states, even if employees do not necessarily have to receive them each time.
What Information Needs To Be Included?
A pay stub is heavily focused on the amount that an employee is paid, but there is a lot of varied information that needs to be included on the stub for it to be both legally valid and useful to you and your employees. But what needs to be included?
Employee Information
Each pay stub is specific to a certain employee, so including their core details on the stub is important. Even if this is not really used for anything specific, it allows each stub to be quickly identified, which can help a lot if you are reviewing the hours a wage-paid employee worked.
The more accessible this information is, the better, and it should ideally all be gathered the moment that the employee is hired. However, it is also a good idea to keep them private and secure when they are not being used. Things like social security numbers, names, and addresses are key.
Employer Details
While employer details are unlikely to change between batches of pay stubs, make sure that it is all correct. This makes a big difference in the legal side of the payment system and also ensures that every pay stub is completely valid.
Hours Worked
For a lot of companies, listing how many hours employees have worked can be a core part of the payment calculations. Employees paid an hourly wage need a reference to list how long they worked, and even salaried employees might earn overtime if they are eligible for it.
Having a full record of the hours worked can be helpful if an employee feels that they were not paid enough or if you need to double-check which employees are consistently earning overtime pay.
For salaried employees without overtime, this is less important, but it can still help if you want to include sick pay or periods where they are not working and thus are not paid as much. If your company has any kind of hourly system in place, add this to your pay stubs.
Gross Income
Gross income is the total amount of money that an employee has earned with no deductions applied. Including this might sound strange since the employee does not actually take away that much money, but it is still important for your own financial records.
Keeping a proper log of how much an employee is paid also tracks how much you spent as a company, which can be a major thing to consider when looking back at your finances. It also makes it easy for accounting teams to calculate things like tax and pension contributions.
Without gross income, it technically wnot be possible to calculate any other payment information, so be sure to include it.
Deductions
Deductions – things like tax, pensions, or any other source that takes away some of the employee’s gross income – are worth listing too. These are things that directly impact how much the employee is actually walking away with at the end of payday, so they should be included anyway.
This also proves that these deductions have been paid for, something that might be worth including in case any legal issues arise. If you can prove that employee tax contributions were paid properly, then you can avoid a lot of awkward investigations or double-checking from outside parties.
Net Income
An employee’s net income is how much they walk away with, meaning that it is perhaps the most relevant point to the employee. Including this is a good way of telling them their exact earnings, whether they are a salaried employee or one who works for a wage.
Make sure to also include anything that might have lowered an employee’s net income, like time off work, as well as anything else that they might have earned if it is relevant (vacation time, etc.). This record needs to be exact, and it needs to be an accurate record of what each employee has actually earned.
Do Employees Need Pay Stubs?
Different states approach pay stubs differently, you are not always required to give them to employees. You need to track the related information and create the stubs, but not all states actually require you to give them to employees unless they ask.
Some states have a legal requirement to give employees either a digital or physical copy of each of their pay stubs, alongside the copy that you have on file. Others have the added note that digital copies need a printed alternative to be provided if the employee asks.
Be sure to look into your location’s laws if you are not sure, and follow them to the letter. The more compliant you are, the less trouble you will run into.
