Paystubs for Employees: All you must know as an Employer

In the modern workspace, it has become the norm to pay employees through paychecks. Employers avoid using cash anymore as checks are simple, higher on accountability, and easier for filing taxes. The Fair Labor Standards Act in the USA requires a business owner to attach paystubs with checks. In this article, let us discuss everything you should know about paystubs as an employer.

What are Paystubs for Employees?

A paystub is an official financial document containing detailed information about an employee’s payment in a pay period. Typically, it includes a worker’s gross income, deductions/exemptions, benefits, and net income. Paystubs are also called checkstubs, salary slips, or paycheck stubs.

If you issue paychecks to your workers, you need to attach paystubs with them. You can use a paid or free check stub maker to speed things up. Many companies now prefer digitized checks instead of manually writing the details each time. You can view your paycheck on an employee portal, and the money gets directly deposited into your account. This method is less prone to error. However, if an employee does not have a direct deposit bank account, you should still be capable of providing handwritten checks.

Why do Employees need Paystubs?

Payslips serve as proof of income for a professional. Each paystub breaks down the payment in a specific period and reflects how much an employee takes home. It serves as the go-to document while filing taxes, in conjunction with the W-2 form. Getting a timely checkstub enhances the transparency of your organization. It promotes a worker’s trust in your business.

Paystubs are also critical when buying a car or getting a new credit card. If an employee needs to apply for a loan or take out a new insurance policy, they will have to share proof of their income with the corresponding financial institution.

What Details should a Checkstub contain?

Whether you use a online paystub generator or manually create payslips, you must cover all the essentials to comply with the laws. The standard requirement includes the payment details, company information, and some personal details of the employee.

• Personal details: It refers to the name and logo of your business along with the contact information. You can choose to put both the address and the phone number. For the employee’s section, add their name, employee number, social security number, and the role they serve in your company.

• Gross income: This section shows the total wages an employee earns before any deductions get made. It is customary to include the gross pay for the present pay period and the YTD (year-to-date) total. This figure usually tallies with the amount shown on the employee’s contract. Occasionally, it will also cover extra payments like bonuses, vacation pay, and sick payment.

To calculate the gross income, you will need to consider the pay rate and the number of payment periods in a year. For example, for an employee who gets paid by the hour, the gross income will be the hourly rate multiplied by the total number of hours they have worked. For a salaried employee, the gross income is the annual salary divided by the number of times they get paid annually, say, every month or bi-monthly.

• Deductions and Exemptions: This section covers taxes levied by the federal government, state, and local bodies. It also includes insurance premiums toward benefits for health, dental, family, etc. As the employer, you must cover your share of FICA tax, medical benefits, retirement plans, etc. Just like the gross pay, you have to include the current and the year-to-date amounts.

• Net pay: It is the amount that an employee takes home after the deductions, exemptions, etc., get subtracted from the gross income.

How can you Build Paystubs for your Employees?

Traditionally, companies used Excel spreadsheets to make paystubs. You can create a format that suits you and update it in different pay periods. If you own a large business with a separate payroll department, you can invest in financial software and create a payroll management system for your employees. Many financial programs create professional paystubs for your workforce. Your team can then share it with the employees via e-mail or attach the salary slips to the physical paychecks. Many companies choose to let employees view their paystubs online on an internal portal.

If you run a small business, you can consider using a digital tool. Some online applications let you enter the requisite financial information and produce checkstubs within minutes. A background calculator usually does all the computing work, which means you won’t have to fret about checking the totals. StubCheck.com is an online paystub generator that gives you the option to use enhanced paystubs with additional details like overtime pay. You can also print out W-2 forms for your staff. Such online programs can be a blessing for businesses of any size, saving both time and effort while maintaining correctness and consistency.

Distributing paystubs to your workforce on time is vital for maintaining a successful business with a committed employee base.  It also makes bookkeeping and tax filing easier for all parties. Now, that is a win-win.