Starting your own business entitles you to an overwhelming amount of change and emboldens you to realize a lot of different things, most especially in the stark contrast between being an employer and being an employee. One of this major difference, now that you get to be the boss, is to carry the responsibility of paying your employees their rightful wages.
Back when you were an employee, you may have only paid attention to the big bold figures at the bottom of your pay stub and then be satisfied upon knowing how much money you get to take home. But being an employer entails a different story. Aside from knowing how much each of your employees receives, you also need to know all the components and the meaning of all the numbers printed on their paycheck. However, knowing what should go on your company’s pay stub should not be confusing, especially through this article that will teach you all the know-how of making pay stub sheet template.
A pay stub is a document issued regularly by an employer that details the total pay, the salary deductions, and, ultimately, the take-home pay of an employee. It has the following elements:
1. Company Details: This pertains to the company name, address, contact numbers, and other relevant details about the company.
2. Employee Details: The employee name, job position, and, sometimes, the employee number are some of the employee details that can be found on a basic pay stub.
3. Pay Period: This refers to the inclusive dates that are taken into account when calculating an employee’s salary. The pay period depends on the frequency that the company pays an employee. The most common pay periods are weekly, semi-monthly, and monthly.
4. Gross Wage: This refers to the total amount of earnings of an employee including the basic company salary, overtime pay, reimbursements, and other bonuses.
5. Deductions: These are the amount taken from the gross salary. Deductions incurred from pay are from the government’s withholding tax and services, company insurance, and loans.
6. Net Income: This is the salary that the employee gets to receive in every pay period. The net income is calculated from the gross pay minus all the deductions.
1. Start with the heading of your pay stub: The heading of your pay stub is comprised of the details of your company, the pay period, and a space for the employee name. The company name, address, contact details, and other company information goes at the topmost part of the pay stub. Following these details are the pay period and the date when the pay stub is issued. Subsequently trailing this part is the name and the number of the employee, which make up for the last part of your pay stub heading.
2. Make a table for the gross wage and its detailed denominations: This part of the pay stub shows the employee’s total earnings. If you are paying an hourly employee then you need to show their hourly rate and the number of hours they worked in. However, employees working on regular hours are defaulted to have worked 40 hours per week. When computing for the employee’s gross wage, make sure to include the pay they earned for working overtime and other bonus pay on top of their basic pay.
3. Create a table for the deductions and its detailed denominations: Below the part where you indicated the employee’s gross earnings, create another table for the employee’s salary deductions. These deductions include withholding tax, health insurance, and other contributions. Also include the amount you deducted for instances when the employee was late or was absent without filing a leave.
4. Make space below the two tables for the net income: Following the two tables is the net income or the take-home pay of the employee. The net income is calculated by subtracting the total deductions from the gross wage. For great emphasis, set this part in bold.
Although the calculation is done by a computer through a payroll spreadsheet, you still have to make sure that the amount you have entered in any part is correct. Also, as the pay stub is distributed regularly, it is best that you keep a template so you can just replace the details every pay period.
Pay stubs are classified according to the type of pay they entail. The most common types of pay are three, which are the following:
Pay stubs are usually printed on a document with the US standard letter size (8.5 inches by 11 inches) or A4 size (8.27 inches by 11.69 inches). They are printed out in two copies, one for the employer and the other for the employee. In some companies, the copy for the employer and the other copy for the employee is printed on the same page, in which case the paper is divided into two parts separated by a perforation at the center. Going with the latter scheme will help you save paper and reduce printing costs.
The Employer Identification Number, or EIN, is a nine-digit number assigned by the internal revenue agency for your business to be identified in different tax invoice documents. Securing an EIN is a top priority when starting a business and a prerequisite when coming up with a payroll.
As an employer, how do I run a payroll?
There are two efficient ways to run a payroll, especially for small businesses. One is to outsource the process and hire a payroll specialist and another is to do it yourself through a payroll software. Though the former consumes less time, it also poses expense for your business. Consider time and monetary factors and see which method works best for your company.
Different countries impose different lengths of time for employers to keep their payroll records. But, in most cases, you, as an employer, need to at least keep the records for at least three years.
Fringe benefits are additional benefits that an employee receive. Most fringe benefits come in the form of non-wage compensations such as health insurance, educational assistance, and stock options. By including fringe benefits to a basic salary package, employers will be able to make for an attractive compensation that will invite great talents to work under the company.
Keeping your salary slip easily to read will make up for a transparent compensation system in your company. Especially that one of the biggest factors that motivate an employee to stay in the company is a responsible executive leader, investing for a good payroll system promotes trust that will foster for a good employee-employer relationship.