Employees need to be compensated for all hours worked. Not only does adequate compensation make employees feel more motivated, but it also increases their morale and job satisfaction. Besides giving your employees a paycheck on payday, you must show them what deductions have been taken from their gross pay.
That means giving your employees a pay stub along with their paychecks. Pay stubs provide employees with valuable details of their salary and wages. While anyone can easily create fake check stubs online, this can be problematic for businesses because providing them as proof of income is illegal. Knowing how to identify a fake pay stub document can help your business avoid hefty penalties. In this post, we’ll look at what a pay stub is and what information it should include:
Table of Contents
What is a Pay Stub?
A pay stub is a document you give employees along with their paychecks on each payday. It details an employee’s pay, including gross earnings, net pay, income benefits, and the associated deductions. Employees can use it as proof of income and to keep track of their salary details, health insurance payments, retirement contributions, and taxes paid. While no federal law mandates employers to give employees pay stubs, it’s often a requirement in most states.
Even if your state doesn’t require you to provide employees with pay stubs, you’re still required to maintain a record of employees’ hours and earnings under the Fair Labor Standards Act (FLSA). Not complying with these laws can lead to facing severe penalties.
What’s Included In A Pay Stub?
While paystubs can vary greatly in style and state requirements, certain details are common on all paystub documents. Knowing what information should be included in a pay stub is crucial to prevent missing key details and for compliance purposes. Here are the basic elements your pay stub should include:
Employment information
This section of a pay stub document includes the basic identifying information of the employer and employee. This includes the business name and address. It also lists the employee’s personal details, including their name, address, and social security number.
Pay period
The pay period section defines the number of pay periods and specific pay dates and shows the total hours worked.
Gross wages
The pay stub should also indicate the total amount earned by the employee for the pay period without the mandatory deductions. The gross salary is often indicated on the employee’s employment contract. Wages can also be calculated based on an hourly rate. For instance, if an employee has worked for 20 hours at $30 per hour, the gross wage would be $600. You must indicate the hours worked, the pay per hour, total time off, and any additional earnings like bonuses, holiday pay, and sick pay.
Tax deductions
Your pay stub must also list each tax withheld from the employee’s check. This usually includes unemployment taxes, federal tax withholding, Social Security tax, state tax withholding, and Medicare withholdings.
Employee benefits deductions
This section lists each amount withheld for employee benefits, such as life insurance payments, health insurance contributions, retirement plan contributions, and Medicare.
Voluntary and Involuntary deductions
The pay stub should also show what voluntary deductions an employee makes from their paycheck each pay period, like a charitable contribution. It should also include a list of involuntary deductions like child support payments and taxes owed.
Net pay
You indicate the total amount paid to the employee or the amount they take home for the current pay period. The net pay is usually the remaining amount after all deductions are made from the gross salary.
Endnote
Giving employees pay stubs during each payday is important, whether you have a new or an already established business. These documents give your employees transparency in their compensation by providing details of their gross salary, deductions from their checks, and their net income. Employees can also provide their pay stubs as proof of income while applying for a loan.