What a Pay Stub Is and Why to Keep a Copy of Paycheck Stubs
January 7 2020 - As a new entrepreneur, one of the hardest tasks that you'll face with the operations of your company is payroll. There's a reason why most payroll positions require an accounting degree and years of experience — it ain't easy!
If you're a budding business owner who doesn't have the budget to hire outside help right now, then you're probably wondering what exactly a paycheck stub is and why you should keep a copy of paycheck stubs.
If so, you're in the right place. In this article, we'll get you started with everything you need to know about paycheck stubs.
What Goes in a Paycheck Stub?
First things first: what exactly is a paycheck stub, and what goes into one?
The answer to that is very simple. If you spent any time in the corporate world or most any other jobs before you started your business, then there's no doubt that you already have been exposed to paycheck stubs.
But if not, then you should know that a paycheck stub is basically a record of paid wages. Every employee receives one whenever they receive pay from their employer.
There are three key elements to a paycheck stub. One, the gross pay that the employee accumulated over the duration of the pay period must be there. If hourly, this will include the number of hours worked (regular and overtime), multiplied by the hourly rate of the employee (include a 1.5x multiple for overtime hours).
Next, you need to list deductions. Take out withholdings for federal and state income taxes. You don't want to get on the wrong side of the IRS — there's no better way to kill a young startup's momentum than to do so.
Last but not least, you need to list net pay, which is simply gross pay minus the withholdings.
Why Should You Keep a Copy of Paycheck Stubs?
Every employer that issues paycheck stubs should keep copies of all the ones issued. This is because the information will be very valuable if you ever are in a pay dispute with your employee.
The paycheck stub will provide information about how many hours they worked, how much compensation they were eligible for, and what deductions from their gross pay were made. You can use this to resolve any dispute over whether or not you owe the employee more money.
To make this process simpler, use an electronic check stub maker that will allow you to house soft copies of the paycheck stubs. In this modern-day and age, there's no reason for you to use a paper-based payroll strategy when a paperless, electronic one is far easier.
Payroll Made Easy
There you have it - with this quick overview to paycheck stubs, you're all ready to start doing payroll. Remember that payroll doesn't have to be hard; if you have a solid understanding of what paycheck stubs are and make sure to keep a copy of paycheck stubs you give out, you're well on your way towards managing payroll for your company.
For more business advice, be sure to check out the rest of the articles on the website.