If there's a topic that's missing
from our site, let us know!
An Example From A Company Viewpoint of What Needs to Come Out of Payroll
How you go about setting up the format for paycheck stubs is really up to you and the software you use. Some companies have a short paycheck stub, others have a paycheck stub as long as a check. Some companies may put year to date (ytd) information on the top of the paycheck stub with recent information on the bottom. Some may do ytd gross followed by this weeks gross followed by ytd net followed by this weeks net.
In some instances, the information may be neatly displayed in a variety of square boxes, in other instances, the information may be a little more difficult to locate due to poor organization. The format is generally going to depend on the software and/or templates being used by the company. There are many business software products that can be purchased and with them, you can create payroll. The format for paycheck stubs will depend on the design the software company has chosen. The same is true if you use an accountant. There may be some options for you to choose, but the basic format is chosen by whoever set up the payroll program.
If you are a small business person and want to make your own payroll checks and stubs using checks purchased from your financial institution or some office supply source, you can. You can even download paycheck templates from Microsoft Word. The format will be completely up to you, but what information displayed is not up to you. There are certain things that need to be included.
As mentioned above, formats can vary depending on the software used and the company preferences. Some paycheck stubs will contain a lot of information, others only contain the information required by law. Here are items which must be included:
Gross Pay - Includes the total amount of income that you earned during a particular pay period. A pay period can be weekly, bi-weekly, or monthly as determined by your employer. This figure does not include any deductions.
Net Pay - This is the amount of income that you actually take home after all the deductions.
Federal Tax Amount - When you were first hired by your employer, you were required to fill out a W-4 form. This form helps your employer to calculate the tax that you owe to the Federal government. It is deducted incrementally from each paycheck, and the amount varies depending on the number of exemptions you chose to claim.
State Tax Amount - Depending on your state of residence, you may or may not have to pay a state tax. If there is a state tax this amount is deducted from your paycheck, based on your exemptions and state law.
Local Tax Amount - Although rare, a local tax is sometimes applied to employees of certain cities, counties or school districts.
Social Security - The Federal government requires every employee to have a certain percentage of their paycheck withheld to augment the Social Security Fund. This entitles you to receive a monthly social security payment upon retirement. A percentage of your paycheck is placed in social security and then your employer matches that percentage. So if the total owed to Social Security is 14%, you will pay 7% and your employer pays 7%. The annual percent withheld is subject to annual increase.
Medicare - Like social security withholdings, Medicare withholdings are also mandatory. Every employee pays 1.45% of their paycheck toward Medicare, and every employer contributes an additional 1.45% on behalf of the employee. Upon eligibility for social security, an employee is entitled to coverage for a majority of their medical expenses.
Year to date (for pay and deductions) - The year to date fields on your pay stub show how much you have paid toward a particular withholding at any point in the calendar year. This can be useful when budgeting for monthly expenses or long-term goals.
Insurance Deductions - Monthly payments for such types of insurance as health (medical and dental), and life insurance.
Retirement Plan Contributions - Plans such as 401K or other retirement options.
Leave Time - This includes vacation hours or sick hours. Most employers will detail how many hours have been used to date, and some will show how many hours are remaining for the calendar year.
Childcare Assistance - If offered by your employer, this amount may appear on each paycheck as a pre-tax benefit.
Medical Deductions - This is something set up by the government, where you can set aside pre-tax dollars that will be used for medical bills (everything from glasses to prescriptions to co-pays)
Important Notices - Sometimes companies will use your paycheck stub to convey important information to you.