What are the vital pieces of information you need to include on a pay statement for your employees? Find out what belongs and what’s unnecessary.
Do you know what’s on a paystub?
Since 82 percent of employees prefer to get their pay through direct deposit, it’s easy to disregard pay stubs altogether. In most cases, you still have to provide employees with a record of their paystub, either online or on paper.
What information needs to be included in a pay statement? Keep reading to find out.
The paystub always includes the full name of the employee. You may have the employee’s address on the pay statement, but this isn’t necessary.
Other basic information includes the pay period for which the employee is being paid. You should mark the beginning date and end date of the pay period.
Next up is the gross earnings. This is the amount of money earned before deductions. This amount depends on whether or not the employee is salaried or hourly.
The hourly rate is just the hours worked multiplied by the rate of pay. For salaried employees, divide the annual salary by the number of pay periods in the year.
The withholdings part of the pay statement is the most confusing for employers and employees. This is because the amount withheld will be different for everyone. Here are some of the most common and required withholdings.
Federal Income Tax
The federal income tax is calculated according to the income level of the employee, their tax filing status, and the number of withholding allowances.
You have to look at their W-4 forms and tax withholding tables to figure out how much should be withheld.
Medicare and Social Security
This is pretty simple to figure out because these numbers are a straight percentage of employee’s earnings.
Employees have 1.45 percent withheld for Medicare and 6.2 percent for Social Security. You match these percentages when you pay payroll taxes.
State And Local Taxes
This will largely depend on whether or not your state or city requires you to withhold state and local taxes. Some states have no income taxes, while other states have a flat rate or progressive tax structure.
As part of your benefits package, you may offer employees a 401(k) plan, health savings account, or group health plan.
Employees usually contribute to these directly from paycheck withholdings.
If our company also makes a matching contribution to any of these plans, you should indicate that on the pay statement, too.
Vacation And Sick Pay
Does your company have a policy that covers paid vacation days or sick days? If you allow for Paid time off, you should note how much time was used in the pay period and how many vacation days or paid time off hours the employee has to remain in the pay period.
This part is simple. You just subtract the total withholdings from the gross pay. That’s the net pay that employees will get in their checking accounts.
Who Gets A Paystub?
Who do you need to provide paystubs for? You have to have them for employees. You have to provide a detailed record that shows what the employee earned and how much was withheld.
It’s for your employees’ protection as much as it is for yours. Should there be a dispute over pay, you can easily prove that you paid the employee the correct amount.
It also will help your cause if you get audited for payroll tax violations. You can show exactly how much you withheld from employee’s paychecks and how much you paid in payroll taxes.
If you have independent contractors, you’re not withholding wages, so you don’t need to have a pay statement for them.
However, if you pay a contractor more than $600 during the year, you will need to give them a 1099-MISC and file that with the IRS.
Federal laws don’t require that you have to have records of pay statements or provide them to employees. However, some states do require that you provide employees access to their pay statements.
States fall into three categories of requirements. Some states are no requirement states because they have no laws that require you to give employees pay statements.
Another group of states is access states, where you have to provide some kind of access to pay statements. That could be either paper or digital.
In access to print states, you can provide employees with electronic pay statements, but they have to be able to easily print them.
Good Pay Statement Record-Keeping
It’s to your advantage to maintain good pay statement records in case your business ever comes under scrutiny by the Department of Labor or IRS.
You should have payroll records for at least four years. The more organized you are now, the easier it is when it comes time to find the files when you need them.
How To Make Paystubs Yourself
Now that you know what information is included in a pay statement, how can you easily create one? It doesn’t make sense to do that by hand. There is too much room for error.
You can use a check stub template that can calculate your federal tax withholdings and state withholdings for you. Plus, it’s easier to manage and maintain records.
Necessary Information On A Pay Statement
In order to have your business maintain good records and good relationships with your employees, you need to create pay statements.
The information that’s included on a pay statement is important for your payroll taxes. It’s also important for employees to see how much money is being held for taxes and benefit contributions.
Do you want to learn more about money and business? Head over to the business section of this site for more useful articles.