You must process payroll if you own a small business. It may be challenging if you don’t have an accountant or don’t use specific software. This process also typically requires you to provide pay stubs for your employees.
Pay stubs enable your employees to track crucial financial information, such as taxes paid, and assist you in keeping payroll records. You may use a pay stub maker to process the required data. Check out what is a pay stub maker and how it works further in the article.
What Is A Pay Stub?
First things first, do not confuse a pay stub for a paycheck. Typically, companies prefer to deposit employees’ bank deposits directly each payday instead of sending a paycheck, but some still use this method or at least send them in electronic formats. However, a pay stub is not a paycheck. An employee can take a physical paycheck and cash it out in a bank. Or they can use electronic paychecks to deposit their bank accounts.
A pay stub (also a check stub or pay slip) is a document that contains information about the employee’s salary and withheld deductions. This document can’t be used to receive money; it merely shows calculations behind the salary. Typically, employers later use these pay stabs for tax preparation, while employees use them as proof of income when applying for a loan or mortgage.
What Must You Include Into A Pay Stub As An Employer?
The information varies from company to company and from industry to industry. However, a few details must always be included in a pay slip. These details include:
- The general information. You can check out a snapshot of a template online to see that all pay slips include the name of the company and its address and the name of the employee receiving a pay slip and their address. This information may also include a Social Security Number and ID. It also includes the date of receiving the salary and the period of the salary.
- Gross wage. It’s the salary that employees would receive if not for the taxes and other withholdings. If you employ hourly workers, their gross income for a specific period is calculated by multiplying their pay rate by hours worked during that period. For instance, an hourly rate is $20, and the employee worked 130 hours during that period. Thus, the gross income is $2,600.
- Deductions. This section includes taxes (federal, state, local), FICA (Social Security and Medicare), employee benefits, and other voluntary and involuntary withholdings.
- Net income. It’s the real salary that an employee receives after all taxes — for instance, not $2,600, but $2,300.
An employer may also include their contributions, but it’s optional. Now, let’s see a simple example.
Example Calculation
Let’s see an example of a calculation. Suppose there is a company called XYZ. The company has ten employees. The company pays a salary every month, so the owner must handle payroll and pay stubs monthly.
One of the employees, Mark, has a pay rate of $15 per hour. Mark worked 100 hours during September. The XYZ company’s owner calculates Mark’s gross wage for September, which is as follows:
- $15 x 120 = $1,800.
Now Mark’s employer must withhold all deductions. Thus, the employer must withhold around $140 for Social Security and Medicare. However, the employer must also withhold federal, state, and local taxes. The federal tax depends on the tax bracket of each person. Thus, Mark’s net salary, the payment he receives after all withholdings, may drop to $1,500.
That’s why providing employees with pay stabs is so important. If you receive all the necessary forms from your employees, such as the W-2 form, you can easily calculate employees’ salaries. Moreover, some employees may be exempt from specific deductions.
For example, Mark may be the father of five children and have his tax burden reduced. However, he also may be a divorced person with a child to support. In that case, the employer must withhold a specific sum of money for child support.
Creating pay stubs may sound like a complicated task, but it’s not, especially if you use generators. A pay slip generator is a tool that enables you to add information from employees’ forms and calculate the data automatically. The best thing about these generators is that you may use these pay slips in the future to make calculations. Moreover, you can categorize data appropriately and reduce the time spent on payroll and pay stubs specifically.
What Are Pay Stub Makers, And How Do They Work?
As mentioned, you can use a pay stub maker instead of printing out templates and filling them out with a pen. You can also use accounting software that will also handle your payroll, keep books, etc. however, this option may be too expensive.
A pay stub maker is an online generator. It’s recommended to use paid ones, like Real Check Stubs. It’s an affordable and safe tool that will cost you only under $9 every time you generate a portion of your pay stubs. Thus, you can spend under $9 a month. Experts recommend using paid generators as they are safer.
The tool enables a user to add all the data mentioned in this article and automatically generate the pay stub. Thus, you reduce the chances of human error since the software calculates everything automatically.
How Do Pay Stub Makers Work?
Standard pay stub generation is time-consuming, especially if you have many employees. Pay stubs are an essential aspect of payroll. Therefore, it’s critical to have a method for producing them rapidly.
Spending your entire day calculating pay stubs and processing payroll negates the purpose of having a small business. That’s when paying stub makers come in handy! A pay stub maker is a generator that helps with handling the data of the company’s employees. You must create an account and choose a template. The template will include the necessary data you must have on a pay stub.
You can fill out the document and generate a pay stub. The document will be sent to your email address!
Follow Techdee for more!
