Pay stubs hold great pieces of information. This information serves as proof as well as a document for income details.
You will often find a pay stub law in most states that necessitate employers to provide pay stubs. Keeping your pay stubs is a great thing that makes future financial endeavors less complicated.
Whether you are an hourly worker or not, pay stubs will help you with a lot of financial situations.
What Is a Pay Stub?
Many people mistake paychecks for pay stubs. Although both are money-related, there is a slight difference between the two you can find in reading a pay stub. A pay stub is just a small part of a paycheck. Surprisingly, this small portion of the paycheck carries great importance. Everything about the employee’s pay is part of a pay stub. It has separate sections for pay earned in a year as well as hourly pay. This document also lists the deductions that were made in the name of taxes.
You might ask, what does a pay stub look like? It all depends on which form you receive your pay stub in - it could be paper or digital form.
Why Pay Stub is Important?
A document carrying all information regarding your payment is undoubtedly of great significance. A pay stub carries great importance for employees and employers. For example, if you need to rent an apartment, the landlord will demand check stubs for the apartment.
This official record will come in handy in different walks of life. Whether you want to provide proof of accurate payments to employees, or the employee needs to prove their income, a pay stub will serve the purpose. Many states do not emphasize keeping pay stubs. However, some states do the opposite. And if you ask us, the latter is in a great position.
In the following two sections, we will discuss the importance of pay stubs for employees and employers. So whichever section you belong to, the information will be of great use. You can also check the ultimate guide to paycheck stubs for more.
Importance of Pay Stub for an Employee
The following few points explain the importance of pay stubs for an employee.
- Serves as proof of income
- Will help in case of any miscalculations
- Serves as proof of past employment
- For compensation in case of an accident
The above four examples are the greatest for explaining the importance of a pay stub for an employee. Suppose you are applying for a job. The interviewer will ask about your experience. You can’t just tell them about your years of experience. You need proof in the form of documents and that document is a pay stub.
Importance of Pay Stub for an Employer
We often consider pay stubs to be important for employees only. However, there is a big reason you are making pay stubs. It’s not only to benefit your employee but yourself as well. Consider the following list.
- Helps deal with business transactions
- Gauges the growth rate of business
- Legal data
- Accurate payment proof
The above four examples are just a little intro to the importance of a pay stub for an employer. Suppose one of your employees files a case against you for not paying them. You can’t just provide a few words as proof that you did pay the employee. Apart from bank transactions, you will need a document mentioning everything related to the employee payment. This is where a pay stub will prove its importance. It will allow you to prove to the judge that you are not guilty.
Why Should Employees Keep Their Pay Stubs?
Employees should keep their pay stubs because it will help them in the long run. Let’s see the following few points.
- Getting a loan from the bank
- Providing income proof for renting an apartment/house
- Proof in case of wrong net pay
- All data related to your earnings
- Great for filing taxes at the end of the tax year
Wondering how to get check stub as an employee? Simply ask your employer/manager. The above points should explain the importance of pay stubs for employees. You cannot do any of the above work without having a pay stub.
Why Should Employers Keep Their Pay Stubs?
Employers need to keep pay stubs for at least a year. Because after one year, new stubs are generated, and the old ones lose their importance. But in general, the following few points will explain why employers should keep their pay stubs.
- Tax returns
- Legal work
- Generating proof in case of employment laws
When filing tax returns, you can check the pay stubs for details. Moreover, if the government asks for proof of you fulfilling employment laws, everything on the pay stub will serve the purpose. In conclusion, pay stubs act as one solution to numerous problems.
When Do You Need to Show Your Pay Stub?
In the case of an employee, you need to show your pay stubs while applying for a new job, renting a house/apartment, getting a loan from the bank, buying a car on a lease, etc.
As in the case of an employer, you need to show your pay stubs in case an employee takes legal action against you for miscalculation. Moreover, you also need to show this document while filing tax returns and as proof of fulfilling employment laws.
Frequently Asked Questions (FAQs)
How long should you keep your pay stubs?
Keeping your pay stubs for at least 13 months is best. After this time, you can easily discard this document. However, as an employee, you must keep it if you are looking for a new job.
What information is included in a pay stub?
A stub includes the following information and more.
- Employee information
- Net pay
- Tax deductions
- Gross wages
- Hourly pay
- Overtime and more
What are pay stubs used for?
Pay stubs serve great purposes. There are several uses for this document. However, it varies according to the person holding it.
How do you get a pay stub?
If you are an employee, you can get a pay stub by requesting one from your employer. In other cases, you should use a pay stub portal to create a pay stub yourself. However, the latter is not better than the former.
Final Thoughts on Importance of Paystubs
Pay stubs carry great importance for employees and employers. It helps the employees mostly in future activities. As for the employer, it allows them to keep track of their business and prove accurate employee payments in case of some legal work.
Keeping a pay stub depends on you. However, the importance this document carries explains the reasons for keeping it. In summary, the final decision is yours.