In the United States, employers and employees need to comply with various rules and regulations. Distinct states in the US govern their affairs differently. However, a similarity cutting across all these states is that both an employer and employee pay taxes. Aside from taxes, other obligatory deductions from a company or an individual may take place. Keeping up with all this can be overwhelming. To properly arrange an individual’s earnings, a pay stub comes in handy.
A pay stub is a document that details an employee’s pay. It can be a document on its own or come as part of a paycheck. It is essential to keep track of what an employee earns, and there is software available that can help any individual generate a pay stub. A paystub creator is not hard to come by. It is readily available online to anyone who wants to access it.
Contents Of A PayStub
A pay stub is an important document. It depicts a person’s financial ability. With well-organized pay stubs by your side, you can access several beneficial services from financial institutions. The pay stub generally consists of a couple of items. These include employee taxes, gross wages, and net pay among others. In cases where a person is self-employed, the pay stub keeps track of financial standing. As a result, the self-employed individual can make strategic business decisions. To better understand the pay stub’s information, let’s view some of its contents.
Employee Taxes and Deductions
Generally, employees and self-employed individuals pay taxes to the government. The pay stub lists the taxes for an employee to know where their money goes. In the US, employees typically pay several taxes. These taxes are federal income tax, state income tax, social security tax, local income tax, and unemployment tax for some states. On the pay stub, each tax is on its line. Apart from employee tax, other deductions also take place. Most of these deductions are individual-based and vary from person to person. Ordinary employee deductions include retirement contributions, insurance premiums, loan repayment, charity contributions.
Gross Wage
It simply refers to the total amount of money an employer owes an employee. It’s the full payment before you remove any deduction. Non-taxable income is also part of the gross wage. The various ways of calculating gross wages majorly depend on the payment agreement. For an employee whose remuneration comes as a salary, their gross payment is per pay period. As for hourly workers, you multiply the pay rate per hour by the hours an employee has worked in a particular pay period. Employers should include the number of hours their hourly employees have put in the pay stub in addition to the pay rate.
Employer Contributions
For some organizations, employers make contributions that are beneficial to their employees. These contributions are also in the pay stub. Generally, employers do not deduct these contributions from the gross pay. Some of the contributions employers offer their employees include retirement packages, health insurance premiums, among others.
Employer Taxes
These are payroll taxes employers pay for each employee to the government. The employer taxes are in a separate section within the pay stub. The taxes that the employer pays are as follows; federal unemployment taxes, state unemployment taxes, and employer portion of FICA tax.
Net pay
Net pay is the amount of money left after you subtract deductions and taxes. For employees who receive non-taxable income, their net pay includes the balance left after deductions and non-taxable income. The net pay is the amount of money one takes home.
Final Thoughts
Paystub is essential for both employees and self-employed individuals. The pay stub makes your financial standing clear, allowing you to access loans within your financial ability. Moreover, it makes it easier for a person to declare their taxes annually.