Anyone working with employees needs to issue and hand out pay stubs. Such documents are required, regardless of the manner in which payments are handed over.
So, what information do paychecks stubs need to contain? Here are some of the biggest essentials.
Information on Gross Wages
Let’s start with the essentials – a pay stub needs to contain details on gross wages for each of the employees.
The gross wage is the amount that an employer has to pay an employee before taxes and deductions. It’s the most basic type of information that needs to be featured in a pay stub.
A gross wage can be calculated in two ways:
- Fixed salaries (monthly is calculated by dividing annual salary by the number of pay periods)
- Hourly wages
This part of the stub usually contains information like:
- Current gross pay
- Year-to-date gross pay
- Total hours worked
- Base pay rate
A paycheck stub will also contain information about the taxes withheld. Usually, this is the most challenging aspect of paystub generation. As a result, many employers opt for software products that can do such calculation automatically (or automate at least some of the calculations).
Some of the taxation data that has to be included in each employee’s stub includes:
- Federal income taxes
- State and local taxes
- Federal Insurance Contribution Act (FICA) information
- Information on other taxes like investment income taxation, investment loan taxation and other deductions
In some industries, employers have to contribute to certain items that don’t get deducted from the employee. There are a few common types of employer contributions:
- Health insurance premiums
- Health savings accounts
- Flexible spending accounts (FSAs)
- Various kinds of retirement plans
Each of these contributions has to be listed individually on the pay stub so that the data is readily available and easy to review.
Once all other sections are entered correctly in the individual employee stub, you’ll get to calculate the net pay.
Net pay is also known as take-home pay. That is the amount an employee will receive after taxes and deductions. Usually, it is the one amount that most workers are interested in seeing and reviewing.
A typical pay stub will provide information about both the net pay for the period under consideration and the year-to-date net pay.
Other Types of Information
While the items listed above are the most essential ones, there could be a few other entries in a typical paycheck stub. Those are:
- Direct deposit information
- Employer taxes like federal unemployment taxes and state unemployment taxes
- Information on insurance provided by the employer
- Additional earnings like overtime pay
- Accrued time off
Is the Issuing of Pay Stubs Mandatory?
All of this may sound a bit too complicated, which is why you’re probably wondering if pay stub issuing is required by law.
There may be some variations by state. The requirements about the types of information to be included in a pay stub can also vary. Hence, it’s important to go through local regulations and make sure you’re making all requirements for correct document issuing.
The good thing is that both electronic and paper-based pay stubs are permissible by law. With the selection of the right software product, you can simplify the filling out of the info and the calculations. The resulting electronic pay stub will meet legal requirements and provide employees with the kinds of data they will be looking forward to.