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A standard pay stub contains information about gross wages, federal and state taxes, deductions, employer contributions, and the amount of net pay.

What Information Needs to Be on a Pay Stub?

Egon Tiderman
March 08, 2020

A pay stub is a non-binding document employers give to their employees when they pay their wages. It contains all the relevant information for a specific payment period. Pay stubs are standard practice these days, but they can be somewhat complicated to understand.

However, it's vital to know what each section of the pay stub represents. Learning how to distinguish between gross and net pay will give you a solid idea of where all the money goes and how it will be used.

It's valuable knowledge to have for more than one reason. Therefore, we'll guide you through all the information that should be on the pay stub.

What Is a Pay Stub Exactly?

Before covering every item listed on your pay stub, let's take a step back and explain what it is. 

A pay stub, payslip, or paycheck stub, as it's also known, is typically a printed document issued by an employer. Essentially, it's a receipt the employee gets that outlines how their pay has been distributed. As the gross wage amount is higher than the net wage the employee takes home, the pay stub is a record of how that money was used.

Some companies send pay stubs to their employees electronically, and others rely on payroll software for the entire process. 

Is Pay Stub a Legal Requirement?

There is no federal law that requires employers to issue pay stubs to their employees. However, the matter of pay stubs has been addressed in every state.

Most states require employers to ensure access to pay stubs and issue a printed or electronic pay stub. There are only nine states with zero pay stub requirements – Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Ohio, South Dakota, and Tennessee.

That doesn't mean that employers in these states don't need to keep any records of their employees' working hours. On the contrary, under the Fair Labor Standards Act (FLSA), all employers must keep a payroll record. If they can't provide a pay stub, they must find an alternative payroll receipt.

All the Information a Pay Stub Should Have

Not all states with payroll laws have the same requirements regarding which information should be on the pay stub. Even though the discrepancies are likely minor, it's always best to check with the local state laws to get it right. Nevertheless, some items are common for all pay stubs.

Gross Wages

In payroll, everything begins with the gross earnings. Often, it's the amount of gross pay that attracts people to a job in the first place. This starting number determines the amount of all the taxes and deductions, and ultimately the net pay. Gross wages can be calculated for different periods.

Typically, a pay stub will have weekly or monthly gross wages and a separate section indicating annual gross wages. There are two ways employers can calculate gross wages — salary and hourly.

For salary workers, the annual gross wage is divided by the number of pay periods. For example, if you get paid once per month, the yearly salary will be divided by 12.

Employees who work by the hour get their wages calculated differently. The number of hours worked is multiplied by the hourly wage the employer pays. For example, if the hourly wage is $15 per hour and a person has worked for 40 per week, their gross wages are $600 per week.

Employee Taxes

The gross wage is the starting point that leads to net pay. But the employee taxes are the first withholdings you'll notice on the pay stub.

Every employee is required to pay a set of federal and state taxes. The good news is that the payslip will indicate the amount withheld from the gross amount for each tax. Here's what the complete list of employee taxes should be:

  • Federal Income Tax
  • FICA Tax (Medicare and Social Security)
  • State Income Tax
  • Local Income Tax
  • State Unemployment Tax (where applicable)
  • Wage Garnishments (overdue child support, outstanding medical bills, student loans, etc.)

Voluntary Deductions

Employee taxes are not a matter of choice — every person with an employment contract must pay them. On the other hand, employers need the employee's consent to withhold these types of deductions.

The most common type of voluntary deduction is health insurance premiums. Most employers offer health insurance to their employees, but they still need to agree to it. The same applies to retirement plans and life insurance premiums. These are all a kind of voluntary deduction that impact gross wages.

Other job-related expenses could be a part of the deductions as well. Some employees must pay their union memberships, pay for their uniforms, or even cover daily meal costs.

Employer Contributions

A pay stub's primary purpose is to outline every withholding from the gross wages. Depending on the type of business, the pay stub might even show the employer's contributions.

Generally, that includes 401K plans and Health Savings Accounts (HSA.) The employer might choose to include other retirement plans as well. Regardless of what they offer to their employees, the pay stub must list all the contributions.

Employer Taxes

Payroll laws require both employees and employers to pay taxes. Each employed individual should have employer taxes listed separately on their pay stub. There are three payroll taxes they are required to pay:

  • Their portion of the FICA tax
  • Federal Unemployment Taxes (FUTA)
  • State Unemployment Taxes (SUTA)

Back Pay

If the employee hasn't been paid the total amount owed, that difference is called back pay. If a pay stub has a "back pay" section, the employer had to fix a previous mistake in payroll. The back pay might also indicate a retroactive pay increase that wasn't implemented on time.

Another reason for back pay could be that the employer hasn't paid their worker state minimum wage and needs to compensate.

Net Pay

The final and often the most relevant item on the pay stub is the net pay. That's the sum both salaried and hourly workers take home each pay period. After every tax and deduction is subtracted from the gross wage, the net pay is what you get in your bank account.

The difference between the gross pay and net pay can sometimes be significant, and an employee might wonder about the accuracy of the calculation. But when they look at their pay stub, it becomes clearer how the net pay sum was calculated.

Why Do Employees Need Pay Stubs?

Pay stubs have multiple benefits for both employers and employees. If you own a company and have workers, keeping payroll records allows you to quickly resolve conflicts over salaries.

If you're an employee, pay stubs have even greater importance. You might need to provide several months worth of pay stubs when you're securing housing or applying for a loan.

The landlord or a bank needs an official document to see whether your income is sufficient. When you're applying for a new job, you might also have to provide pay stubs as proof of salary history. However, in some states and cities, this practice is not permitted. Pay stubs are also beneficial in situations such as creating prenuptial or postnuptial agreements.

How Long Should You Keep the Pay Stubs?

Employers should keep copies of pay stubs and all relevant records for at least four years, as mandated by the IRS. The company must also keep records of wage rates, seniority and merit system, job evaluations, and collective bargaining agreements for at least two years. If an employee is fired, the company must keep their payroll records for at least a year after the termination of their employment.

For employees, creating a record of pay stubs is also essential. No law requires people to keep their pay stubs, but it's a helpful practice in many ways. Having at least three recent pay stubs is often enough, but that is an entirely personal choice. Plus, you can ask your employer to re-issue a pay stub in many cases should you require it for a specific purpose.

Can You Alter the Pay Stub?

You can make changes to your pay stub, but only if you have the employer's approval. These changes are typically enforced if an employee wants to opt-out of a retirement plan or change their health insurance.

The Power of a Pay Stub

Pay stubs are standard practice these days, and most people don't think too much about them. But when you analyze what they represent, it's easy to see how important they are for business owners and everyone in the workforce.

The job application process involves a discussion about gross wages right from the start. If both the employer and the employee aren't clear about the taxes, deductions, and other withholdings, a lot of confusion might ensue.

That's why it's crucial to understand every section and column on the pay stub and know precisely what sum to expect as net pay.

If you need easy access to a pay stub template, go to Paystub Engine and generate it now.