A Step-by-Step Tutorial To Create Payroll Stubs

Learning to create payroll stubs (the documents that are provided to employees as part of their paycheck) is key in any HR department. They help you accurately report earnings and deductions, ensure legal compliance, and maintain transparency with your team. In this article, we explore how you can make a payroll stub for your employee in simple steps with a template and a breakdown of how pay stubs work. We also provide a suggestion for a tool that can save you time managing the process.

Paystub Workings

Here, we explore the key sections of a pay stub.

1. Earnings

• Gross earnings: This displays an employee’s total earnings before any deductions. It encompasses regular pay, overtime, bonuses, commissions, and any additional income sources.
• Hours worked: For hourly workers, this outlines time worked, the corresponding pay rates, and the earnings for different categories such as regular hours and overtime.

Take a look at this paystub from the University of North Carolina as an example of how an hour-based paystub can look.

2. Deductions

• Federal income tax: This reflects the amount withheld for federal income tax
• State income tax: If applicable, state income tax is itemized separately
• Other deductions: Health insurance premiums, retirement plan contributions, and other benefits are set out here

Pro-tip: Learn the different types of taxes in our recent article. We cover federal, state, local, and additional types of payroll tax. 

3. Net Pay

Net pay, also known as take-home pay, is the section of the paystub that represents the final amount that the employee will receive after all deductions have been subtracted from their gross earnings. This paystub example from Monday.com clearly shows how deductions and net pay look on a payroll stub.

Creating Payroll Stubs

After understanding what a paystub is, the next question arises—how to create a paystub for employees? When a company hires a lot of people, it is a herculean task to make the pay stubs individually for all of them. That’s why many organizations choose to use automated tools that can generate stubs in minutes. Multiplier, for example, can calculate tax in multiple countries; this means all you have to do to generate an accurate and legal paycheck is to enter:

• Contact information of the employer- company name, detailed address, contact number, and Employer Identification Number
• Contact information of the employee- name, place of residence, Taxpayer Identification Number, Social Security Number, or Individual Taxpayer Identification Number
• Hourly wage
• Total number of hours worked
• Total number of overtime hours put in
• Paid time off
• Bonuses received for the work during the period of the pay stub
• List of employee benefits

If you’d prefer to create payroll stubs yourself follow our guide in the next section.

A Step-By-Step Guide To Creating Accurate Pay Stubs

1. Gather all of the information listed in the section above.
2. Calculate the employee’s total earnings before deductions. This should include regular pay, overtime, bonuses, commissions, and any other applicable income.
3. Determine and itemize all deductions, including federal and state income tax withholdings and any other relevant deductions (e.g., health insurance and retirement contributions)
4. Subtract the total deductions from the gross earnings to calculate the employee’s net pay.
5. If applicable, include a section detailing your contributions, such as matching retirement plan contributions or health insurance contributions.
6. Download our free editable template document where you can input the information. Double-check the details and distribute them among employees.

How Do I Make a Pay Stub for My Employee? Top 3 Mistakes To Avoid

In this section, we explore how you can create a paystub process that allows you to avoid errors.

1. Ensure that you have provided complete information

As simple as the task of punching in information in a form can be, it’s easy to end up making mistakes. One such mistake is putting incorrect and/or inaccurate data in the stub. More often than not businesses do not list the date of payment or pay period. What’s more, the contact information of the employer or the employee can sometimes be missing.

2. Use automated calculation software

While calculating the total hours worked, it’s easy to accidentally input the wrong number, especially when managing a global payroll for a growing staff force. To avoid this it’s best to use automated software such as Multiplier to make pay stubs.

3. Keep a record of all pay stubs

Be sure to hold onto pay stubs at least till the end of the tax year. Otherwise, you could face difficulties during tax filing, and in some cases, penalties or fines. Retaining pay stubs will also help employees to identify whether they have been making the right tax deductions over time.

Get Support With Creating Payroll Stubs

Manually creating payroll stubs takes a lot of time. And this is particularly true as you scale. When you’re responsible for managing a lot of information in databases and documents, you can lose hours each week and errors can start to creep in. To save time and mistakes, use an automated tool such as Multiplier. Our software automatically calculates tax across borders so all you have to do is input the essential details.

FAQs About Creating Payroll Stubs

Q. Is it mandatory to provide pay stubs to employees?

In the United States, providing payroll stubs to employees is typically mandatory though this varies slightly between states. Federal law doesn’t mandate pay stubs, but it does require employers to maintain accurate records of employees’ wages and hours. Creating pay stubs is the easiest way to track these earnings while ensuring employee satisfaction.

Q. What deductions can be found on a pay stub?

Common deductions found on a pay stub include federal and state income taxes, Social Security and Medicare contributions, and contributions to retirement plans, health insurance premiums, and other employee benefits.

Q. Do I need special software to create pay stubs?

While you don’t need software to create payroll stubs as there are plenty of templates online, it is advisable to use an automated system. When manually creating pay stubs, mistakes can easily creep in and you can lose hours making calculations. A solution like Multiplier automates the entire process, saving you time each month on tax calculations and pay stub creation.