What is a pay stub?
As an employer, you’re required by the Fair Labor Standards Act to keep detailed internal records for each of your employees. Some states also require you to provide a written statement of these details to your staff in the form of a pay stub.
A pay stub—also called a pay slip or earnings statement—is given to employees at the end of each pay period along with their paycheck. It outlines their gross income, deductions and net income for the period. Depending on your company’s payroll schedule, this information may be provided weekly, biweekly, monthly or semi-monthly.
The pay statement can be a detachable stub that’s part of a check or a separate slip distributed on the same day a direct deposit or electronic payment is made. In some cases, the pay stub itself might be an electronic document.
Employees use the pay stub to confirm they’ve been paid the correct amount. It’s also useful as proof of income when they apply for credit, loans or leases.
Legal requirements for pay stubs
Pay stub requirements vary by state. Some states ask that pay slips are issued with each paycheck. Others only require pay stubs to be given if the employee asks. Some states are very specific about the type of information that’s included and how the pay stubs are delivered; for example, whether digital copies are permitted. Check your local employment laws to ensure that you’re compliant.
A handful of states don’t have any legal requirement for issuing pay stubs, but businesses can still provide them as a courtesy.
What is included on a pay stub?
There are many ways to present information on a pay stub. You have the flexibility to choose a template that works for you. Make sure the details are organized as clearly as possible so the statement is easy to read.
1. General information
All earning statements should clearly indicate who’s paying and receiving the wages and the dates these wages are earned. This typically includes:
- Employer/business name and address
- Employee name and address
- Employee Social Security number
- Employee ID number
- Date range for the pay period
- Date the check is issued or direct deposit is made
2. Wages earned
This section breaks down an employee’s gross income before taxes and other deductions. The information varies depending on how employees are compensated, but usually includes:
- Pay rate (hourly or salaried)
- Hours worked
- Overtime pay
- Bonuses
- Sick pay
- Vacation pay
- Back pay
- Total gross income
Employees paid by the hour should see their hourly rate and total hours worked. If they’re paid an overtime rate or double time, these rates and hours should appear on separate lines.
The pay rate for salaried employees is the amount they’re paid each pay period. This is determined by dividing the total salary by the number of pay periods. For example, a worker earning $36,000 per year who is paid monthly sees a pay rate of $3,000 on their stub. The hours worked in this case don’t affect the calculation.
Once you’ve included all sources of income, provide the total gross income before deductions are made. This appears in two forms:
- Gross income for the pay period
- Cumulative gross income for the year-to-date
3. Deductions
This section of the pay slip indicates the amounts taken off an employee’s gross income, including those required by the Federal Insurance Contributions Act (FICA). Deductions include:
- Federal tax
- State tax, if applicable
- Employee share of FICA Social Security taxes
- Employee share of FICA Medicare taxes
- Health insurance
- Life insurance
- Retirement contributions
Each deduction is shown on a separate line with totals for the current period and year-to-date period.
4. Net income
Now it’s time to summarize the total paid to the employee for this pay period. This figure is the gross income less taxes and deductions. It should be shown for the current pay period and year-to-date.
Include a check number or reference number (for an electronic payment) to indicate how the employee is paid.
5. Employer contributions and accrued leave
Some pay stubs provide additional information that doesn’t affect net income but is useful for employees to know. This may include:
- Contributions made by the employer toward Social Security, Medicare, health insurance or retirement plans
- Paid vacation and sick leave, including time accrued and taken
