Are you running a successful business from home and want to offer pay stubs to your employees? First, you should know what goes into a pay stub. It is a receipt that breaks down an employee’s paycheck. It includes commissions, taxes withheld, gross wage, and health insurance premiums applicable to an employee during a specific pay period. 

Pay stubs help employees track their taxes, deductions, and total income or net pay. As an employer, you can create a pay stub manually at home, but the process can be time and energy-consuming. That’s when an online pay stub generator comes into play. 

Knowing how to make pay stubs at home with an online pay stub generator can help you do the job within seconds. This article will give you every basic information you should know to create a pay stub at home. So let’s dive in!

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Table of Contents

  • What Is a Pay Stub?

  • What Does a Pay Stub Include?

  • Who Should You Offer Pay Stubs To?

  • How To Make Pay Stubs At Home? 

  • Summary

What Is a Pay Stub?

A pay stub or a check stub is a financial document that shows a detailed breakdown of an employee’s current paycheck. It includes an employee’s gross income during a particular pay period in a year. It also lists crucial itemized withholdings for federal taxes, such as Medicare and Social Security (FICA), and deductions, including health insurance premiums and retirement plans.

You can take the pay stub as a payment receipt an employer issues to their employees. Many employers attach pay stubs physically to the paychecks, while others provide them digitally. Employees can easily download and review the document online.

As an employer, federal law doesn’t oblige you to offer pay stubs to every employee, but some states do. It is also a good accounting practice that ensures your business’ credibility. 

What Does a Pay Stub Include?

Before learning how to create pay stubs, you should know what to include in the document. The requirements for pay stubs may vary from state to state. But generally, the document includes the following information:

The Employer’s and Employee's Details

Whether you run a startup or an established business, you must provide complete details about yourself in the pay stub. This primarily includes your company’s name and address. You can also be more detailed and mention your industry and niche. 

Employers must also mention the employee's personal details in the check stub. This includes their name, address, and Social Security number. 

The Pay Period

Every company has a specific pay period in which they make salary transactions. A pay stub should have the payment cycle clearly mentioned.

Mentioning the pay period helps determine how much salary an employee receives on every pay date. It also evaluates the start and end days for making hourly payroll calculations. 

Gross Pay

Gross wages are the salaries an employee receives after the taxes withheld or deductions. It may include extra compensation benefits, such as a holiday or sick pay and bonuses. The total gross wage amount for a pay period is calculated on two bases:

  • Annual Salaried-Employees. These workers are paid on a specific pay period in a year. (Annual salary / Annual pay periods)

  • Hourly Employees. These workers are paid for the number of hours they work. (Hours worked X pay rate an hour)

Working Hours and Pay Rate

A pay stub should also include the total hours an employee worked in a year, including both regular and overtime hours. It is particularly vital for non-exempt (hourly) employees. But salaried workers should also have working hours mentioned on their pay stubs. 

The employer should also mention the pay rate an employee earns for every hour. Some workers are paid a specific pay rate for working overtime. It should also be a part of the pay stub. 

Tax Deductions

Every US state has a tax withholding form that employees are required to submit. On the federal level, they must determine their total income tax withheld through the W-4 Form

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According to the Federal Insurance Contributions Act (FICA), the employee Social Security tax in 2022 is 6.2% of the first $147,000 earned as income. The Medicare tax rate is 1.45% on all wage ranges. But high-income earners will have to pay a 0.9% additional Medicare tax. Both equal the 7.65% total FICA employee tax rate. 

Employers deduct 7.65% from the employee’s paycheck as a business expense. These deductions should be mentioned in pay stubs.

Benefit Deductions

Employee benefit deductions are the amounts withheld for the employee’s insurance premiums or the retirement plan. These include health insurance or the retirement plans provided by the company, such as 401(k) plans

The 401(k) contributions need to be made with pre-tax money. The employer should add all the benefit deductions to the employees’ pay stubs. 

Unemployment Taxes 

The Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA) provide funds for many unemployment programs in the country. The employer pays for these taxes and mentions them on every employee’s pay stub. 

Net Pay

Net pay is the actual salary amount credited to an employee after all the deductions. 

Who Should You Offer Pay Stubs To?

A company comprises different workforce levels, such as permanent employees, independent contractors and subcontractors, and self-employed individuals. Employers must know to whom they need to offer pay stubs to avoid unnecessary hassle. 

If your company has a diverse talent pool, you should know the following things before learning how to make pay stubs at home. 

Employees

Pay stubs record an employee’s finances during a pay period. A permanent employee needs a check stub for the following reasons:

  • Even if the state or federal laws don’t require employers to provide pay stubs, many institutions ask for these documents as proof of income. That’s especially the case when an employee applies for a loan or rents an apartment. 

  • The pay stub includes the employer’s details and the employee’s salary breakdown. It proves the employment and total income of the employee. 

  • A check stub is essential when an employee files for tax returns. It includes the employee’s income, taxes paid, and other benefits. 

Independent Contractors and Subcontractors

Independent contractors and subcontractors are not considered “employees” of a company. That’s why no employer can deduct or withhold taxes from their paychecks. 

These workers need an IRS 1099 form that verifies the income they receive from a client in a year. Issuing a pay stub to your independent contractors and subcontractors will help them double-check the amount written on the 1099 document. Like the 1099 form, the pay stub is also paid at the end of the year. 

Self-Employed Individuals

Self-employed workers also require a pay stub to verify the income they receive from their clients. It also helps them record any deduction or premium made by the business they have been working for. 

If self-employed individuals own a business, the pay stub will help them separate their company’s income from their personal account. This way, they can report the correct business profit when filing taxes in their native countries.

How To Make Pay Stubs At Home? 

Knowing how to create pay stubs is crucial for every small, medium, and large business. While you can hire a payroll company to do the job, it could lead to fake pay stub creation. Any person with malicious intent can create a pay stub illegally on behalf of your company. 

You can avoid this problem by keeping the payroll responsibilities to yourself. You can manually generate pay stubs at home, but the process can be pretty time-consuming. So the best and easiest way to generate pay stubs for your employees is by using an online pay stub generator.

How To Create a Check Stub Manually?

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Manual pay stubs could work for you if your company has a small workforce. To create pay stubs for your permanent or W-2 employees, follow these steps:

  1. First, calculate the employee’s gross pay for the pay period.

  2. Then, include all the tax deductions based on the current tax laws and FICA regulations.

  3. Make the benefit deductions, including employee-paid part of health insurance premiums and employee-elected retirement plan contributions.

  4. Add any remaining deductions, including different types of insurance coverages.

  5. Finally, calculate the employee’s net pay, the total income mentioned on the paycheck.

Attach the pay stub document to the employee’s paycheck. You can also create the pay stub online on the employee portal. While the process may seem simple, things will be easier if you use an online pay stub generator or payroll software. 

How To Use a Pay Stub Generator?

Many pay stub generators allow business owners to generate pay stubs within a few minutes. These fully-automated platforms perform all the calculations, including deductions and withholdings, under the current tax laws. 

An online pay stub generator also costs less than employers pay for an accountant’s salary. Here is how to make pay stubs at home using a pay stub generator:

  1. Start with entering all the information into the pay stub generator.

  2. Then, select any pay stub template you think goes with your company’s theme. 

  3. Use the customization options to make your pay stub look easily understandable. Some customizable fields include the hourly rate, hours worked, deductions, gross wages, taxes, etc. 

  4. Finally, download and print the pay stub.

  5. Don’t forget to save the pay stub as a record.

The process takes just a few minutes compared to the hours you’d spent manually creating pay stubs. Automated pay stubs also have fewer chances of error. But you must ensure that you have entered the correct information and used the right customization fields. 

Summary

Creating pay stubs is a vital accounting practice for every business. The document breaks down an employee’s paycheck. It includes the gross wage, benefit deductions, tax deductions, working hours, pay rate, and net pay. 

There are two answers to “how to make pay stubs at home.” One is to do it manually, and the other is to use a free pay stub generator to create pay stubs online in seconds. Choosing any method depends on your business requirements.  

You need the employee’s personal information, salary, working hours, and deductions to generate pay stubs. However, the process can consume all your energy if you don’t know how to calculate taxes. If that’s the case, you can rely on any best pay stub generator.

The pay stub generator takes all the legwork involved in pay stub creation, allowing you to focus on business aspects that matter.