Understanding What are Pay Stubs and How Do They Work?

Being a business owner is not something we would describe as an easy thing to do. Countless elements require your attention, and you need to pay attention to them every single day. Only by doing that, you can keep your business at the highest possible level, which is the main goal, right?

The finances are probably the most challenging aspect you need to focus on. When you are an employee this presents itself in a different light than when you are the employer. You don’t receive the salary. Instead, you are the one who needs to make sure that all the members of the team get it on time.

When you look at it from this perspective, the procedure becomes significantly more complex. You also need to be constantly updated with the tax laws, which are changing frequently. Making even the smallest mistake in this regard can lead to significant problems. Paystubs are one of the ways you can prevent these problems.

That’s why we want to shine a light on what paystubs is.

The Basics

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First, we want to describe some basics of this concept. We are talking about a part of the paycheck every employee will receive along with the salary. We are talking about a paper slip where you can see all the relevant elements. In the business, the world element is referred to as a paystub or a pay slip.

In case your business gives its employees a physical paycheck, then the pay stub will be another paper added to this document. At the same time, if you receive it online, it will be another file in the package employees receive on their email or any other sort of documents they receive this way.

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The time when employees receive these is the same as their salary. It can be either weekly or monthly. Sometimes, this timeframe can be different, depending on the agreement the managerial staff has with the employees. That element can be found in the contract signed by the two parties.

What Do These Include?

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When it comes to the information you can find on these papers, they can differ based on the industry your business is in. Nevertheless, there are a couple of them that are always a part of it. We are talking about the personal data of the employee, like name and social security number.

Also, the data about the company is found on these. Besides that, there’s the financial aspect. You can find both net and gross wages. Having an insight into these is helpful since you can have a complete insight into your paychecks, like seeing how much money you have earned after taxes are deducted.

Not to mention that this is a great way to determine whether your salary matches the number of hours you have worked that month. You can see that people whose work is measured by the hours they invest spend at their job position. That doesn’t mean that the employer wants to cheat them. It’s simple, mistakes are always possible.

Explaining the Deductions

As we’ve already stated, pay stubs include any tax deductions. However, we would like to elaborate on that. The first line we want to point out is the federal tax income. For those who didn’t know, the state where you live is not the only one entitled to a certain percentage of your salary. The federal government also gets a percentage.

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Besides these two aspects, social security is another major component. It makes sense since all the people with a social security number are required to contribute to the social security fund where the funds are amassed. In the United States, this figure is slightly more than six percent.

The next in line is, of course, Medicare. It is a fund where the money is amassed to provide medical benefits to those who are sixty-five or older. Also, it provides certain benefits to those who are disabled. The figure that is deducted with an idea to fill this fund is roughly one and a half percent.

The Benefits of Pay Stubs

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Now, let’s take a look at the benefits of pay stubs.

Easier Tax Handling

The most obvious benefit that comes to mind is easier tax season handling. While it makes sense to keep track of these throughout the year, it is clear that this procedure can get somewhat harder when we are about to enter the tax season. Keeping track will make this process much smoother.

Since all the documents need to be in one place when you enter the tax season, collecting all the pay stubs can make this process practically effortless. At the same time, your employees will have a much easier time filling W-2 forms that are needed for this procedure. It is the biggest benefit of keeping pay stubs in one place.

Expenses Tracking

Without any doubt, paying your employees their salaries is one of the biggest expenses your company has. Pay stubs don’t provide benefits just for the employees, but they can also be important for the company itself. That way, it is possible to track your expenses and take action whenever needed.

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For example, they may start growing significantly at one point, for whatever reason. Naturally, mistakes are always possible. Also, you need to focus on situations when they get significantly higher as a result of additional expenses that weren’t predicted by your weekly or monthly budget.


Creating one of these is a rather simple procedure. However, that’s the exact reason why you need to be extra careful with it. We’re all humans and we all make mistakes, especially when we become overconfident about doing something that we don’t believe requires too much effort.

Before we create these, we need to understand what they are. In this article of ours, we’ve covered all the essential elements of pay stubs, and why they are so important both for companies and employees. We are certain you will find this guide helpful in making precise pay stubs and preventing all unpleasant situations.