Whats on a pay stub? Everything you need to know to pay an employee Article

Companies should check with local laws to ensure they are providing pay stubs displaying accurate information when they are required to do so. Paystubs are important because they lay out information about an employee’s wage during a certain period of time.

Form W-2 reports an employee’s annual wages and the amount of taxes withheld from their paycheck. Pay stubs in the U.S. vary according to how they are generated, but most contain a number of key features, including your pay, taxes, and deductions. It’s important to ensure that this information is correct, but not enough people make an effort to do so. Doing your own calculations—or verifying the accuracy of those performed by the IRS—can save you from making a costly mistake. You must also contribute a portion of your paycheck to Medicare. For this program, every worker contributes 1.45% of their gross income (there’s no income cap for this tax), and every employer pays an additional 1.45%. Just as with Social Security, you must pay both portions if you’re self-employed.

State and Local Taxes (SALT)

Pay stubs will differ slightly in appearance depending on your employer and your deductions or contributions. Some pay stubs may be a little more detailed than others, but the general information provided will be the same. Be sure to check that the information on your last pay stub of the year matches the information on your W-2 form, which details your wages and taxes paid for the year. A flexible spending plan allows you to set aside pre-tax dollars for medical expenses including health insurance copayments, deductibles and prescription drugs.

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Gross Earnings

Your company may take money directly from your earnings and place it into your insurance policy payment. If this is so, you can keep an accurate record of how much you have paid for insurance and when the payment was made. You will find basic information at the top of your paycheck stub, such as the name and address of your employer and the date that the paycheck was issued.

• You might be tempted to ignore this information, but you should understand what it means and why it’s important.
• Once you select a pay stub tool, simply enter all the relevant information, and the software will create a paycheck stub for you.
• Pay stubs are created in conjunction with paychecks, so each employee gets a new pay stub for each pay period.
• When a business is new, small, or has very limited resources, it may have no choice but to handle pay stubs and other payroll responsibilities the hard way—manually.
• You’ll want to review your state’s laws to make sure your business is compliant with issuing pay stubs.
• They are useful to help avoid any confusion or disputes regarding pay as they clearly outline where percentages of the wage are being deducted and why.
• Canadians age 65 years and older are eligible for monthly payments through Old Age Security .

He has been writing and editing for more than 20 years and has a knack for digging deep into a subject so he can make it easier for others to understand. As an editor for The Balance, he has assigned, edited, and fact-checked hundreds of articles. This ‘pay stub’ definition fits what is referred to as a ‘payslip‘, ‘pay record’, ‘check stub’, or ‘wage statement’ in various countries. Typically, a paystub is issued to an employee each month, or sometimes each week, depending on how frequently a company pays its staff. Correctly paying employees and keeping in line with tax laws is vital for companies. In some jurisdictions, this can include ensuring that paystubs are accurately generated. A document attached to or accompanying a paycheck as a record of gross earnings and deductions.

Gross pay

The check stub also shows taxes and other deductions taken out of an employee’s earnings. And, the pay stub shows the amount the employee actually receives (i.e., net pay). A pay stub is part of a paycheck which details the hours worked, taxes paid and wages earned for a specific pay period and year-to-date payroll.

Include year-to-date statistics for the above categories to give you and your employees a better idea of their earnings history. Year-to-date statistics are a tally from January of the current year to the date of the pay stub. The pay period refers to the week, two weeks, half-month, or month for which you’re paying your employee. If you do your payroll and need to make pay stubs, we’ll show you what to include.

Personal tools

You might be paid on a weekly, bi-weekly, bi-monthly, or monthly basis. Regardless of your https://www.bookstime.com/ employer’s pay period, expect to receive your paycheck on your employer’s set payday.

Anyone who receives a paycheck from an employer should understand the information included on their pay stub and review it regularly. It’s important to make sure that you are not only receiving the money you are entitled to but also paying the correct amount in taxes. With the increasing popularity of direct deposit, fewer people are receiving a physical paycheck, which makes checking this information even more necessary. Here are the major terms and figures on your pay stub with which you should be familiar. As mentioned above, your pay stub will show you your wages and what you have made and any taxes taken off. Depending on your job and agreement, your pay stub may also show deductions for things like life insurance premiums or corporate pension plan contributions.

Tax Deductions

Hannah Logan is a writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog EatSleepBreatheTravel.com or find her on Instagram @hannahlogan21. At will employment gives businesses more flexibility when needing to make changes. Retirement Services 360-degree integrations with top 401k record keepers provide the access and automation your clients need. Find out more about international payroll, and HR and payroll in the US.

Sometimes, the amount of federal income tax deducted from your earnings may be too high or too low. This could be due to a job change or the birth of a child, for instance. If your circumstances change, then you should inform the IRS or your company’s human resources department as soon as possible. If you have paid too much tax, they will calculate the amount you are due and pay you a refund.

“The plan continues to address our focus in Brazil and with development in the pre-salt, with a lot of investment in exploration and production, but also in the downstream ,” he said. Payroll software Gusto produces nearly faultless pay stubs, which it calls earning statements. what does pay stub mean An employee who makes $60,000 per year will have earned half of her annual pay by the end of June. Check out our small business guide to payroll deductions for a list of the most common payroll deductions. “A really clear and simple explanation to read your pay stub.”

• The payroll deductions on a pay stub vary depending on the small business employee benefits you provide.
• The formulas used below apply unless there is non-cash income.
• This amount will vary depending on how many exemptions you claimed when your filed your W-4 tax form.
• These federal and state withholdings account for much of the difference between your gross income and net income.
• Some employers may enter the amount of time off you have used or have yet to use.