Are you looking forward to getting a good pay stub maker for your business? Here is a guide for understanding pay stub deductions.
One of the most difficult parts of running a business is dealing with payroll. Most accountants go to school for at least four years to understand the intricacies of tax and payroll law!
It’s hard for you as a new business owner to get a handle on it.
However, getting to know what a paycheck ought to look like and understanding pay stub deductions is crucial to paying your employees on-time (which is the only way to make them stick around).
Keep reading to learn about your pay stubs and find out what you need to know about pay stub deductions.
What Is a Pay Stub and What Goes on It?
First and foremost, let’s answer the simple question: what is a pay stub, and what goes on it? If you’ve spent any time working in a formal capacity for a regular paycheck, then there’s no doubt that you’ve at least come across a pay stub at some point.
The pay stub is the part of your paycheck that houses information regarding the itemization of your pay. It includes how your pay was calculated and what deductions went into the calculation.
For instance, let’s say that you’re paid an hourly rate plus commission. The pay stub will record how many hours you worked that week (including any overtime if applicable) and will also include a calculation of your gross pay from the hours worked multiplied by your hourly rate. Then, it will also include an itemization of the addition of any commission to your paycheck.
In short, a pay stub gives you all the information you need to know as to how you got the final number that went into your bank account.
Understanding Pay Stub Deductions
One of the key parts of a pay stub is the section dealing with deductions. The first kind of deduction is withheld taxes. Depending on the information submitted by the employee on their W-2, your paycheck should withhold a certain amount of federal and state income taxes.
The second kind of deduction is a benefit deduction. Whenever you onboarded your employees, they should have gone through a process where they elected to enroll in whatever benefits your company offered that they desired.
If, for instance, your employee contributes to an HSA account, or if they contribute to a life insurance premium, then that amount must be deducted from their paycheck. This info will go on the pay stub.
Last but not least, the deductions section will also often house information as to what the employer contributes. If you do 401(k) matching or any other kind of contribution, that should go in here.
Once you know how you will format deductions in your employees’ pay stub, make sure to format that into whatever pay stub maker you choose to use.
Know How to Use Your Pay Stub
Now that you are well on your way towards understanding pay stub deductions, you’re ready to choose the right pay stub maker for you and incorporate it into your payroll process.
For more business advice, be sure to take some time to check out the rest of the articles on the website!
