Have you ever looked into the salary details that you receive? Do you know what amounts are deducted from your salary? Once you plan to start earning, whether full-time or part-time, you receive a salary, and the details of that salary are mentioned on a document known as a pay stub. A stub basically refers to a payslip, wage statement, or payment slip that is given to employees by the employer. Whether an employee is paid by bank or by hand, the pay stub is an important document that is given physically or digitally to inform the employee regarding the payment details.
Usually, a pay statement is a written summary of an employee’s net salary after taxes and deductions. This pay stub provides a lot of details about the employee, such as the pay period, the pay rate, gross income, tax deductions, insurance and retirement deductions, reimbursements, employer benefit payments, and net pay after all benefits and deductions are deducted. It is considered an important document in an organisation as it builds confidence between the employer and employee, provides transparency about the payment method, and reduces the miscommunication related to the payment methods.
Benefits Of Pay Stub
For some employees, a pay stub may appear as an unnecessary thing, but it plays a very important role in their lives. It provides an employee with a lot of benefits, such as:
- Legal Compliance: In some places, you will find that providing a pay stub is considered a legal document, and the laws have specified all the important information that must be included in the pay stub document. By doing so, there is an accurate record of payments, which is considered very important at the time of audits and legal disputes.
- Clarity and Transparency: It provides clarity among the employees related to what they are earning and how much pay is being deducted. A pay stub helps an employee understand in detail how their money is kept in the organisation. They can check their pay stub, which ensures that there are no errors, and this builds strong trust between the employer and the employee.
- Dispute Resolution: If an employee faces an issue related to salary, then the pay stub helps in resolving the issue easily since there will be clear evidence of all the things related to salary. It also helps to avoid misunderstandings related to pay and helps maintain a good relationship among employees and employers.
- Time Efficiency: When everything is stated in the pay stub, it reduces the number of times employees interact with the employer to resolve queries that they may be facing regarding the payroll. This helps save time for both employees and employers and helps them focus on their work more efficiently and sincerely.
Elements Of Pay Stub
There are a lot of things that are covered on the pay stub, through which an employee gets to know about all the important information related to salary. Here are all the things that are covered on the pay stub.
1) Personal Information: The first thing covered in the pay stub is all the personal information of the employee, which includes name, address, social security number, and employee ID. All these things help to provide a clear image of the employee and the specific field in which they are working.
2) Pay rates: Every employee is paid differently as per their skills and qualifications, but still, an organisation has a per-defined rate for every designation. Pay rates for regular, overtime, and double time are clearly specified so that employees know at what rate they are getting paid.
3) Pay period: It usually defines the time period for which you are getting paid. Since the time period varies from organisation to organisation, in some organisations there is a monthly pay period, and in others, it pays you on the basis of every two weeks. So the time period is clearly specified in the pay stub.
4) Pay Date: This refers to the date of the month in which you are getting paid. On this date, you will receive a direct deposit or a paycheck from the employer. This is the amount that you get for the pay period specified on the pay stub.
5) Hours worked: The number of hours you have worked in an organisation is also specified in the pay stub. This is because some employees may have worked overtime or double time for some days, so when the hours are mentioned, it will be easy for them to check the extra hours they have worked.
6) Year to date: It refers to the entire earnings that you have earned in a particular year. In some organisations, you will check that the YTD includes both gross wages and net pay, and in others, one of the two things is included.
7) Paid time off (PTO): In many companies, you will be provided with paid time off, which means you can take leaves for a predetermined number of days and still get paid for them. In this case, you can take leave for vacations, illness, or some personal work. The number of days you take leave and get paid for them is clearly specified in your pay stub.
8) Gross pay: Gross pay refers to the total amount of money that an employee earns in a company during a given pay period. The amount specified is before deducting the taxes, complementary benefits, and other payroll. It is usually specified to tell an individual about the total earnings he or she has made in a particular, defined period of time.
9) Net pay: It is the amount that an individual receives after deduction of all taxes and payrolls. This amount is also referred to as take-home pay since you directly receive it in person or by bank transfer.
10) Deductions: There is a separate section on deductions in your pay stub that tells you about the taxes, insurance premiums, and other costs that will be deducted from your gross wages. Some of the basic deductions mentioned are related to withholdings, medicine, employee taxes, and many more. This amount is clearly stated so that the individual knows about the different types of deductions that are made.
How to Create a Pay Stub
Creating a pay stub varies from organisation to organisation. In some small companies and startups, pay stubs are created manually, which sometimes leads to a time-consuming process. Therefore, there are a lot of digital ways to create a pay stub, which will not only save you time but also make it easy to understand. Here are some of the common ways through which an organisation can create a pay stub effectively.
- Payroll Software: It is one of the simplest ways to create a pay stub for a large number of employees in a short period of time. When you make the pay stub using different software, you just have to add the key information about the different employees, like personal details, direct deposits, hourly, salary, overtime status, pay schedule, wage rate, and withholdings. The different types of pay stub software used in Australia are QuickBooks Online, Easy Payslip, Cloud Payroll MicroPay, Gusto, and On Pay.
- Pay Stub Template to Create a Spreadsheet: If you want an affordable option to create a pay stub, then you can check for the different templates that are provided by Microsoft Excel or Google Sheets. These platforms offer you a lot of free templates from which you can choose as per your preferences. You can also create your own pay stub template from scratch, but this may be a time-consuming and hectic process. But it is always suggested to use the built-in payroll spreadsheet templates, as they will help you complete your task more quickly and efficiently.
- Microsoft Word or Google Docs: You can also create a pay stub on Microsoft Word and Google Docs, but on these platforms, you need to create them from scratch. To make your task a bit easier, you can use the fillable forms in the document. The major disadvantage of using a doc file to create a pay stub is that there is no backup record of the data, and moreover, you have to do all the calculations by hand, which may increase the risk of human error. So instead of using a document file, you can use the spreadsheets and software available for pay stub creation.
Who Needs A Pay Stub?
A pay stub is an essential document in the organisation and is needed by the following people:
1) Employers: Employers need a pay stub, as in some states, issuing a pay stub is mandatory as it helps to tell about an employee’s earnings. They basically need this information to keep a record of all the employees in a well-mannered way.
2) Employees: Employees consider this document an important part of their work profession as it acts as a proof of income and helps them know about every detail in their salary process. It also helps them easily apply for a loan or rent a home or apartment if they need any.
Conclusion
As you have read in this blog, a pay stub is a very powerful tool that helps you know about the total amount you are earning, the amount that is reduced due to taxes, and what exactly you are receiving in hand. Whether you are an employee who wants this document to have a clear picture of his salary or an employer who is generating this document to keep a record of all the employees, a pay stub is an important and mandatory document in a company. Whether you are giving a pay stub or receiving a pay stub, be sure it is free from any type of mistake.
Frequently Asked Questions
Yes, as per the law, it is compulsory to prove a pay stub to the employees in the organisation. Suppose an organisation has hired you under Commonwealth workplace laws. In that case, it is compulsory for them to keep all the records of an employee related to personal information, working hours, pay period, deductions, earnings, and more clearly stated in the pay stub provided by the employee.
Yes, there is a difference between a pay stub and a paycheck. A paycheck is a physical check through which you get your salary once you deposit it in the bank, whereas a pay stub is a document that contains details of the amount that is mentioned in the paycheck.
Yes, there is a sample template available through which you can create a pay stub. You can check out this sample template on Google Documents, which is named Google Docs Pay Stub Template. This template has a traditional format that includes all the important elements of the pay stub.
A pay stub is a very important document that should be kept safely with the employee for at least one year, as you can easily verify it with the pay period and other essential details so that there are no misunderstandings or conflicts between the employer and the employee.
If an employee does not have a pay stub, they can ask their employer for it, as it provides details of the salary they have earned. The details mentioned here help an employee know better about the working hours, pay-off time, pay period, pay rates, deductions made, and earnings done.
The other names for a payment stub are pay stub, payslip, statement, note record, stub, slip, pay advice, and payment record. There are different names through which a pay stub is defined at different places.
In different organisations, there are different pay periods, such as monthly, semi-monthly, or weekly. The pay period for which you will get a salary totally depends on your organisation.
If you find an error on your pay stub, then you can directly contact the employer who generated the pay stub and describe it clearly so that it can be resolved. A discussion with the employer will help you clarify your doubts and, at the same time, maintain a good relationship between you and your employer.
To keep track of your pay stub, you can check your employee website, since on that website everything related to your pay stub will be updated. There are many companies that provide you with an employee login and password where you can easily track your pay stub.