If you’re unaware of what pay stubs are, look no further.
Paystubs are regularly given to employees from their employers as they act as proof of income. They allow both businesses and employees to keep track of where their money is going. You’ll find several pieces of information on paystubs that are essential for filing taxes and getting things like loans.
Many startup business owners don’t think much about paystubs. Instead of handing your employee a check and calling it a day, you’ll want to give them a paystub with it so that you don’t run into any problems in the future.
Keep on reading to learn how to create a paystub!
Why Are Pay Stubs Important?
Paystubs are some of the most important documents that employers provide to their employees. Paystubs show how much an employee has earned over a certain period, making it a crucial proof of income for many people.
People typically use paystubs for record-keeping and when applying for loans. As proof of income, people can take out loans because lenders will see how much they’ve earned and when. Paystubs also show where an employee has worked.
Here are some of the common loans that require proof of income:
- Applying for a mortgage
- Financing a vehicle
- Requesting credit
In most cases, employees will have other forms that prove their income, such as bank statements and checks. However, paystubs are one of the primary ways that self-employed contractors keep track of their income.
When it comes time to file taxes, paystubs will make it a lot easier to fill in the necessary information. Unlike checks, paystubs will outline how much of the income was taken out for taxes. You’ll find how much went into Social Security, insurance, state tax, and more.
How to Make A Pay Stub For Employees
Providing your employees with pay stubs will make managing finances easier for both you and your employees. Your pay stubs will essentially act as a receipt and you should provide them during each pay period.
After you’ve created a template, you can set up computers to allow employees to print them whenever they’d like.
The first thing you’ll need to do is the math. Using whatever spreadsheet program you’d like, you can start making columns for gross pay, deductions, and net pay. This will allow you to set up a template and keep records.
Calculate Your Employee’s Gross Pay
Gross pay is one of the easier numbers to crunch as you simply have to divide their annual salary by the number of paydays throughout the year. So if an employee earns $15 an hour while working 40 hours a week, they’d earn $600 per week. If pay periods are two weeks long, their net pay should be $1200 each period.
If your company offers time and a half pay for overtime, you’d multiply their hourly rate by 1.5. That $15 an hour would be $22.5 each hour of overtime. Add all of the overtime pay into the gross pay.
After calculating the gross pay of your employees, the next step is to calculate deductions. Deductions are anything that comes out of each check. Like previously mentioned, taxes, Social Security, etc. are some of the common deductions in most companies.
To properly do this, you’ll need to figure out how much state and local taxes are taken out of paychecks. You can find this information in the IRS Employer’s Tax Guide for 2020.
The amounts will differ depending on whether an employee is married or the head of the household. Keep in mind that you may not have to charge local taxes, so look into your city’s rules.
FICA Tax Withholding
When it comes to Social Security and Medicare deductions, you don’t need to go through much work to figure out how much to deduct. Social Security takes 6.2 percent of an employee’s gross pay whereas Medicare takes 1.45 percent.
Determine the Net Pay
Net pay is the amount that’s left over after the deductions and additions to the employee’s gross salary are made. Whenever an employee gets a check, this is the amount that they’ll be able to deposit.
How to Make A Pay Stub Online
Although it’s possible to make a pay stub with a spreadsheet, it’s much easier to create pay stubs online with a generator. These generators will ask you to input all of the required information. From there, it will create a professional pay stub that can legally be used as proof of income.
Instead of using a generator, you can use the likes of Google Docs to create pay stub templates. Google Spreadsheets provides users with just as many tools as Excel does, and it’s easier to access these because they remain on the internet.
If you’d like, you can download your pay stub templates from Google Docs onto your computer. Most of the cloud-based office programs on the internet allow you to do this, but Google Docs is one of the more optimized ones.
Create A Paystub Today!
Understanding how to create a paystub will make you an owner in more ways than you can imagine. You won’t have to worry about employees not knowing how much they’re making, and you’ll find it easier to file taxes.
Get started by loading up a spreadsheet program and creating categories for gross pay, deductions, and net pay. Be sure to include information about your company somewhere so that it can be verified as a legitimate pay stub.
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