Having a business is typically viewed as a great accomplishment and a benefitHowever, business owners must follow strict rules regarding documentation, taxation, payroll, etcOne such requirement is providing employees with pay stubsKeep reading to learn about pay stubs and paystub generators.
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What Is A Pay Stub?
Before we learn what a paystubs generator is, let’s figure out what is a pay stubA pay stub is a document that sums up the compensation an employee is entitled toThe document includes the salary before and after-tax withdrawalIt is also known as a paycheck stub or earnings statement.
A pay stub lists how much an employee was paid within a specific pay monthA pay stub is sent to a worker when the employer makes a direct deposit into the bank account or when it is connected to the paycheck.
What Data Does A Pay Stub Include?
Paycheck stubs provide information on a few key areas of employee interestThe pay stub should include the following information:
- General information.
- Gross wages.
- Deductions and withholdings.
- Employer payments.
- Net income.
As you can tell, a paycheck and a pay stub are two different documentsIn simple words, a pay stub is a reflection of how an employee’s salary or wage is calculatedBefore the taxes and withholdings, the employee receives one figure, while after withholdings, they receive their net income, which is the actual salaryThe pay stub offers a transparent way of dealing with salaries, thanks to all the data includedNow, let’s delve into the details of each section.
General Information
Pay stubs include information about both the company and the employeeFor example, the information on the employer includes the firm’s name and its address.
The employee’s information includes:
- Name.
- Address.
- Social Security Number.
When a firm uses a payroll app or software, employee data becomes more available to both the employer and the employee.
Gross Wages
The employee’s gross pay (or income) is the amount of money they earn before the employer withholds taxes and other deductionsIt is the entire amount earnedthe employee before all deductions and taxes.
If the workers are paidthe hour, their gross income is calculatedtaking their hourly pay rate and multiplying itthe number of hours they worked in a given pay periodFor instance, if the employee earns $20, and the pay period is 70 hours, the gross income is:
- $20 x 70 = $1,400.
Thus, the person’s gross income for the period taken is $1,400This data should be included in the check stub.
Deductions And Withholdings
The list may vary from company to company, and every employee may cover different deductionsHowever, the standard list includes the following:
- Deductions for employee perksThese include life and health insurance, retirement contributions, etc.
- Involuntarily deductionsA typical example is when an employee doesn’t cover child support, and the court order requires the employer to withhold a figure from the income.
- Voluntarily deductionsA typical example is when an employee asks to donate money to charity.
- Deductions for income taxesThese include federal, state, and local tax withholdings that are different in every state and county.
Deductions must also come with a period for when the employer withheld them.
Employer Payments
Employers must make particular contributions on their workers’ behalfA typical example is when an employer contributes to the FICA tax (Federal Insurance Contributions Act)Additional contributions include benefits and premiums for employees.
Net Income
From the example above, you’ve learned that the employee has earned $1,400 for 70 hours they worked during a periodHowever, it’s the gross wageThe gross income, which is the employee’s salary, is different and always lower because of all taxes and deductions withheldIn the end, the person may receive $1,000 (more or less), depending on the employee’s tax bracket and state and local laws.
How Pay Stub Generators Work?
Provided the information from the section “What Data Does A Pay Stub Include?” one can easily assume that dealing with pay stands is as difficult as handling payrollAn employer (or accountant) must fill out each field for each employee, and it takes a ton of timeLuckily, companies can use paystub generators.
Companies (and sometimes self-employed individuals) use a pay stub generator to keep track of payroll informationThis data includes:
- employee earnings;
- deductions;
- taxes;
- contributions;
- compensation.
The generator offers a way to organize financial records and compute tax returnsThus, it’s a beneficial and powerful tool to usebusinesses and self-employed alike.
How To Use A Pay Stub Generator?
A pay stub generator is an online tool or serviceThe first thing you must do is to choose a generator (more on that further in the article) and then create an accountThe account creation requires adding the name of the company so that you don’t have to include it every time you fill out a template.
Typically, pay stub generators provide dozens, if not hundreds, of pay stub templates for employers to choose fromMoreover, you can even customize a templateadding contact information, a logo, a motto, etcOnce you’ve chosen the template, you must fill out the dataNow you know what data to include on the pay stub, so once you’re done, you will receive all pay stubs in your email boxThus, you can hand these documents over to your employees.
What Tools To Use?
There are numerous online pay stab generators to useHowever, it’s not recommended to use free servicesFirst, using free services is dangerous as you don’t know whether they keep your data safeSecond, the accuracy of such tools is doubtful.
Luckily, there are many convenient and affordable check stub generators available onlineThe list goes as follows:
- Real Check Stubs.
- Shopify Generator
- Form Pros Generator.
- The PayStubs.
- Wix Generator.
- Wave Financial.
These services offer several subscription plans and affordable pricesYou can choose any and benefit from the free trial period to see if the service works for you.