Whether you’re an employee or an employer, you must know the basics of pay stubs. By understanding the different things that are on a paystub, you can catch accounting errors, and if you are an employer, help your employees decipher their paychecks.
What Are Paystubs?
A paystub is the itemized part of a paycheck. The paystub, also called a pay slip, shows the wages earned during a specific pay period and year-to-date. This will include your hourly rate, overtime pay, your pay stubs deductions, time tracking, and taxes withheld. The total amount of earnings will be listed as an employees gross and net pay. Gross wages are what you earn before any taxes and deductions are taken. The pay stub then details the taxes and deductions that are taken out of the gross earnings. After all taxes and deductions, the amount the person receives, known as net pay, is listed.
A pay stub can be either electronic or printed. Employment laws, for some states, require an employer to provide an employees pay stub. Some companies only offer electronic paystubs, unless otherwise requested in writing. Each state has its own requirements on what should be on a paystub. Some states have a state tax in addition to the federal tax. But one thing that will be on every paystub is the various federal taxes.
Paystubs are typically required by banks if you are trying to get a loan, car dealerships, and some rental agencies will require proof of income. They are also important for keeping records of your earned wages and making sure you are being paid appropriately.
Deciphering Your Paystub
The different items on a paystub can be broken up into three categories:
- Gross wages
- Taxes, deductions, and contributions
- Net pay
Let’s take a closer look at each of these categories.
1. Gross Wages
As mentioned earlier, gross wages are the total amount earned before any taxes, deductions, or contributions are taken out. Gross wages fall into two categories: hourly or salary.
- Hourly: Hourly gross wages are calculated by multiplying the total hours worked during a specific pay period by the hourly pay rate.
- Salary: Salary gross wages are calculated by dividing the annual salary amount by the number of pay periods designated for that year. So if you are on a monthly salary, it would be your yearly salary divided by 12.
Gross pay is broken down into two separate columns, current and year to date. Within this section, your hours worked, and pay rate will be included. All overtime and double time worked will also be included.
2. Taxes, Deductions, and Contributions
As nice as it would be, you do not take home your gross wages. Payroll taxes and other deductions are taken from the gross pay, reducing your take-home pay. These taxes and deductions will be itemized so you can see the amounts taken from your gross pay. Let us take a look at the most common taxes and deductions.
- What is OASDI on a paystub? OASDI is an acronym for Old Age, Survivors, and Disability Insurance. It is also called FICA tax (Federal Insurance Contributions Act). In terms that everyone can understand, Social Security Tax.
- What is GTL on a paystub? GTL stands for Group Term Life. This is a life insurance policy provided by your employer. Not all employers offer this, and you can typically opt-out if you don’t want it. This benefit is frequently offered at no cost to the employee, but options to purchase additional coverage for spouses and children are available.
- What is FIT on my paystub? Federal Income Tax, or FIT, will be on everyone’s paystub. FIT tax is calculated based on the amount earned, marital status, federal withholding allowance, and any other withholding amount specified by the employee. This tax rate is different for everyone and is based on annual income.
Other types of taxes and deductions might include retirement plans, health insurance premiums, state and local taxes if applicable, and a number of other voluntary deductions.
3. Net Pay
Net pay is the amount left after all taxes, deductions, and contributions. This is the amount you will take home or have directly deposited into your bank account.
What Does a Paystub Look Like?
Below shows a pay stub example. Keep in mind, pay stub looks will vary but usually, the same information is included such as:
- Employee name
- Pay period and date
- Hours worked
- Gross pay
- Deductions
- Taxes
- Employer contributions
- Net pay
How to Get a Paystub?
If you are an employee, your employer will likely provide you with a paystub. If you are paid in cash, you can easily create one using our pay stub generator.
How Do I Make a Paystub?
Whether you are a small business owner looking to create paystubs for your employees or an individual needing proof of income, you can easily and quickly create a paystub using the paystub generator offered on our website. Simply fill in all of the required information and click “View Your Stub.”
About Paystubsnow.com
Paystubsnow.com offers an affordable document solution to small businesses and individuals. Using our services, you can create accurate and reliable paystubs, W2 form and 1099s. Employers can rest assured that they are providing their employees with accurate information in regards to their earned wages. Individuals can use our services if they need proof of income if, for some reason, they are not provided with paystubs or are being paid cash. We do not provide fake documents; all information you provide should be truthful and accurate.
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