How to Make a Pay Stub in 3 Simple Steps
Wednesday, 29 April 2020

 Finances are important to anyone who's conducting a business. Click here to learn how to make a pay stub so that your business can run as smoothly as possible.

 Many states legally require employers to give pay stubs out when an employee is paid. 

A pay stub is a break down of your earnings that shows any taxes that were taken out and other deductions from your paycheck.

Your employees will need pay stubs for things like renting an apartment or applying for a loan. 

Read on to find out how to make a pay stub and learn other things you may need to know.

How to Make a Pay Stub 

Using excel or a similar program, you can do the math. You need to figure out your employee's gross pay, the deductions, and the net pay. Having a template saved on excel would be best so that you can use it every pay period. 

After all your calculations are done you could go ahead and use a paystub maker to make your pay stubs.

1. Calculate Gross Pay 

To start a pay stub you need to calculate the gross pay for your employees. For workers who earn a salary all you have to do is divide the number of paydays per year by what they get paid annually.

For workers who get paid by the hour, you would have to multiply the number of hours they worked that pay period by their hourly rate. Calculate any overtime by multiplying their rate by 1.5 then by the number of hours they worked overtime. 

Bonuses from the overtime and commission can be added at the end to the number you got when multiplying their hourly rate to the number of hours worked for that pay period. 

2. Subtract Any Deductions From the Employee's Gross Pay  

The pay stub should display all local and state taxes. It should also show deductions such as retirement and insurance. You can look up federal, local, and state deductions by using an IRS tax table.

You will need to know if the employee is married, single, or the head of the household because the amounts taxed differ based on the status of those things. Be sure to check whether your area charges local taxes or not.  

Calculate your social security and medicare taxes by multiplying the employee's gross pay by 6.2% for social security and 1.45% for Medicare taxes. Make sure to have separate columns for these on your spreadsheet so that it is clear for you and the employee. 

If you provide life insurance or 401k plans at your business you can deduct this from their gross pay before their taxes so that less will be taken out of their gross pay. 
If any of your employees have wage garnishments applied to their income you should make this deduction after you calculate their taxes. 

3. Calculate Your Employee's Net Pay

After calculating gross pay, the deductions, and adding any commission or bonuses to your employee's gross pay the amount you have left is their net pay.
The net pay is what amount will appear on their paycheck. As the person that is paying out, you need to know the net pay to be sure you are giving them the amount they have earned.

Be Prepared to Distribute Pay Stubs 

You now know how to keep track of your business expenses and your employee's earnings.

It's important to know how to make a pay stub so that you can keep copies of them to keep track of your business's expenses or if you may ever need to show pay stubs in legal cases. 

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