Skip to content

Form Pros

  • Business
    • Banking Resolution
    • Cease and Desist Letter
    • Contractor Agreement
    • Employee Termination Letter
    • Employment Verification Letter
    • Employment Agreement
    • General Partnership Agreement
    • Letter of Recommendation
    • LLC Operating Agreement
    • Loan Agreement
    • Non-Disclosure Agreement
    • Promissory Note
    • Purchase Agreement
    • Purchase Order
    • SBA Form 160
    • Vehicle Bill of Sale
    • View All Business Forms
  • Personal
    • Child Medical Consent
    • Last Will And Testament
    • Living Will
    • Power of Attorney
    • Power of Attorney for Health Care
    • Revocable Living Trust
    • View All Family & Personal Forms
  • Real Estate
    • Commercial Lease
    • Commercial Sublease
    • Contract For Deed
    • Deed Of Trust
    • Eviction Notice
    • Letter of Intent
    • Month-To-Month Lease
    • Quitclaim Deed
    • Residential Lease
    • Residential Sublease
    • Warranty Deed
    • View All Real Estate Forms
  • Tax Forms
    • Create Pay Stub
    • Form 1099-MISC
    • Form 1099-NEC
    • Form 2553 S Election
    • Form W-2
    • Form W-4
    • Form W-9
    • Voided Check
    • View All Tax Forms
  • PDF Editor
  • Start a Business
    • Form Your LLC
    • Start a Corporation
    • Registered Agent
    • Apply for an EIN
    • Foreign Qualification
    • Beneficial Ownership Information
Home » Blog » How to Create a Pay Stub and Calculate Wages

How to Create a Pay Stub and Calculate Wages

Last updated April 30, 2025
Create a Pay Stub and Calculate Wages

Creating a pay stub is an essential part of managing payroll, but the real challenge lies in knowing how to calculate wages accurately. Whether you’re an employer preparing paychecks or a contractor verifying income, understanding the math behind gross pay, deductions, and net income is critical. A pay stub is more than just a summary—it breaks down exactly how you calculate earnings and apply withholdings.

In this guide, we’ll cover the basics of what a pay stub includes, then walk through how to calculate wages step by step. We’ll show you how to calculate gross wages, identify the taxes and deductions that impact take-home pay, and use tools to automate the process accurately.

Paystub Basics

A pay stub is a document that shows how an employee’s wages are calculated for a specific pay period. It typically includes key details like employee information, hours worked, gross earnings, taxes withheld, deductions, and net pay (the amount the employee actually takes home).

Paystubs can be issued digitally or in print, depending on the employer’s system. Both formats serve the same purpose—keeping a clear record of how wages are earned and adjusted.

Need a deeper breakdown? This is an in-depth explanation of everything that goes into a paystub.

How to Calculate Wages (The Core of It)

Knowing how to calculate wages accurately is the most important part of making a pay stub. Let’s break down each component of the wage calculation process.

1) Gross Wages: The Starting Point

Gross wages are the total earnings before any deductions or taxes.

Hourly employees: Multiply the number of hours worked by the hourly rate.
Example: 40 hours × $20/hour = $800

Salaried employees: Divide the annual salary by the number of pay periods in a year.
Example: $52,000 ÷ 26 biweekly pay periods = $2,000

Overtime pay: Typically calculated at 1.5× the regular hourly rate for hours worked over 40 per week.
Example: 5 OT hours × ($20 × 1.5) = $150

2) Common Add-Ons to Gross Pay

Additional earnings can boost gross wages and must be included in the paystub.

  • Commissions based on performance or sales.
  • Bonuses for meeting goals or milestones.
  • Tips, where applicable.
  • Reimbursements for work-related expenses (if paid through payroll).

3) Deductions: Pre-Tax vs Post-Tax

Deductions reduce taxable income and/or net pay.

  • Pre-tax deductions: Lower the taxable income before taxes are calculated. Examples include health insurance premiums, 401(k) contributions, and HSA payments.
  • Post-tax deductions: Come out after taxes are applied. These might include union dues, wage garnishments, or charitable contributions.

4) Taxes Withheld

Employers are required to withhold several types of taxes from employee wages.

  • Federal income tax: Based on the employee’s W-4 information
  • FICA taxes: Social Security and Medicare
  • State and local taxes: Vary depending on location

5) Net Pay: The Bottom Line

Once you subtract all deductions and taxes from gross pay, you’re left with net pay—what the employee actually takes home.

Formula:
Gross Pay – Deductions – Taxes = Net Pay

Example Wage Calculations

Let’s bring it all together with two examples—one for an hourly employee and one for a salaried employee. These will show how gross pay, deductions, and taxes all lead to the final net pay.


– Example 1: Hourly Employee –

  • Name: Alex
  • Hourly rate: $18
  • Hours worked: 42
  • Overtime: 2 hours × ($18 × 1.5) = $54
  • Gross pay: (40 × $18) + $54 = $774

Deductions and Taxes

  • Pre-tax health insurance: $50
  • Federal income tax: $70
  • Social Security & Medicare (FICA): $59.23
  • State tax: $25

Net pay calculation:
$774 – $50 – $70 – $59.23 – $25 = $569.77


– Example 2: Salaried Employee –

  • Name: Taylor
  • Annual salary: $60,000
  • Pay schedule: Biweekly (26 pay periods)
  • Gross pay: $60,000 ÷ 26 = $2,307.69

Deductions and Taxes

  • 401(k) contribution (pre-tax): $150
  • Federal income tax: $230
  • FICA: $176.54
  • State tax: $90

Net pay calculation:
$2,307.69 – $150 – $230 – $176.54 – $90 = $1,661.15


Take Charge of the Process

While it’s important to understand how to manually calculate wages, most businesses and freelancers use digital tools like FormPros to streamline the process. The FormPros paystub generator takes care of the heavy lifting—automatically calculating gross pay, deductions, and taxes while formatting everything professionally for your records.

Still, accuracy is key. Even when using a tool, make sure to double-check:

  • That hours worked, pay rates, and pay periods are correct
  • Employee or contractor details are accurate
  • Deductions and tax settings reflect your current local and federal requirements

Using a tool like FormPros doesn’t replace due diligence—it enhances it, helping you save time while keeping your payroll accurate and compliant.

Create Your Paystub Now

FormPros Has You Covered

Simplify your paperwork with FormPros! From creating paystubs, W-2s, and 1099-NEC forms to generating LLC Operating Agreements and even voided checks, our easy-to-use platform has you covered. Save time, reduce errors, and handle your business documents with confidence. Start now and see how FormPros makes professional form generation fast, affordable, and hassle-free!



Mark Mogilnitsky

Mark Mogilnitsky is a content writer specializing in Financial Form Generation, with a passion for simplifying complex processes for individuals and businesses. I thrive on crafting clear, engaging content that empowers users to navigate compliance and documentation with ease.

Recent Posts

  • W-2 vs 1099: Which One Should You Use?
    When it comes to tax reporting, Forms W-2 and 1099-NEC are ...
  • Paystub vs paycheckPaystub vs Paycheck: Most People Get This Wrong
    Understanding your income documents is essential—especially ...
  • Man receiving keys after a car loan.Applying for a Car Loan? Here’s When You’ll Need Paystubs
    When applying for a car loan, lenders don’t follow a fixed ...
  • Articles of Incorporation vs Operating Agreement
    Starting your own business means you need to do a lot of ...
  • No Paystub? No Problem. Discover Paystub Alternatives That Work
    While paystubs are a common go-to for verifying income or ...

FormPros Can Help!

  • Legal Contracts
  • Tax Forms
  • PDF Editor
  • Document Signing
Create Your Paystub Now

Form Pros

  • Home
  • Business Forms
  • Family & Personal Forms
  • Real Estate Forms
  • Tax Forms
  • Blog
  • Testimonials
  • Account
  • Contact Us

About Form Pros

BBB Accredited Business Form Pros offers online generators for legal, tax, business & personal forms.

132 W. 36th Street,
New York NY 10018

Customer Support

1(855) 881-2648

support@formpros.com
Hours: Mon-Fri. 9am – 5pm EST.

Chat
Terms & Conditions Privacy Policy Refund Policy