If you are running a business, then pay stub records are most important. However, it is required by law that every employer should give it to employees. In ordinary language, the pay stub is also called payslip, paycheck, or stub. However, it contains all essential information that covers a specific period. But the employer and employees should know how it works. So, let’s start digging more details:
What are pay stub records?
A pay stub is an amendatory and official document that shows the payroll information for a certain period. We may call it a wage statement. However, it is a detailed employment document with net pay, wages, tax deductions, employer and employee information. So, this mandatory document is handled by the HR department. According to the fair labor act, employers need to keep track of an employee's working hours. In this way, they can estimate other essential information.
Typical uses of pay stub record:
We mentioned earlier that pay stub records are vital for tax purposes. Moreover, it keeps the employer and employee away from conflicts. Apart from this, you can use the pay stub for the following purposes:
- It helps if you want to rent an apartment or are interested in buying. So, if you have a pay stub, then you can prove your income source easily.
- Moreover, it is a life savior when it comes to receiving loans. Yes, you have to provide pay stub records to get loan money.
Apart from the above reasons, some employers want to see pay stubs during the employment process. But this practice is highly unethical and even banned in most American states. Still, a pay stub is vital, and we can't deny the importance.
The information included in the pay stub record:
According to federal law, it is not mandatory to provide pay stubs to the employees. But these are the states who make this document compulsory. So, if you get the pay stub, then there are the following details on it:
| Gross pay | Federal taxes withheld | State taxes |
| Local taxes | Deductions of insurance benefits | Retirement or pension plan contribution |
| Wage garnishment | Back pay |
Note: Wage garnishment is the amount that your employer keeps to pay off your debts. The debts could be like child support or tax bill payments.
Pay date & period:
By the term pay date, we mean the date when an employee receives the payment. On the other hand, the pay period is the time that the pay date covers. So, the pay stub records cover this and show whether the employee receives a weekly or monthly salary.
Working hours:
Another vital section shows the complete detail of the hours for which an employee or 1099 independent contractor worked on the job. Apart from this, it also indicates whether the worker is receiving hourly wages or working on salary.
Gross wages:
Gross wages are the salaries that employees get before deduction of any tax etc. So, this section entails all vital details of the following things:
- Basic Salary
- Regular & hourly wages
- If there are any overtime wages
- Double overtime wages
- Holiday and vacation pay
- Commission
- Tips, bonus or any reimbursement, etc.
The combination of all of these factors makes the gross wages of an employee. So, in the very first section of the pay stub, you will see gross wages.
Deductions: Pre-tax & tax:
In this section, the pay stub includes all tax and pretax deductions. For instance, the employee pretax deductions include health insurance premiums or other traditional contributions. Later, they subtract all these deductions from gross wages to find the remaining amount. There are the following types of taxes that deduct from the gross wages:
| Social security tax | Federal income tax | Applicable state taxes |
| Local taxes |
On the other hand, some after-tax deductions get cut from the after-tax gross wages. So, both of these deductions should be separated on pay stub records.
Whole year deductions:
In this section, the record includes year-to-date wages that employees earned in the whole year. But this earning is mentioned there, including taxes. However, this information is beneficial, especially when it comes to the reconciliation of the W-2 form.
Net pay:
After all, pre-and after-tax deductions, the employee receives a specific amount of money. Thus, this receiving amount is known as the net pay.
After reading the above detail, one thing is clear that pay stub records are helpful for employees. Above all, you may need a copy of this document for credit or an employment application. So, it's vital to keep it in your access. You can directly go to the employee section of your company's website to get copies of the payment record.
