Ways Paystubs Can Improve Your Business
Good bookkeeping involves keeping records of every employee’s pay and providing each of your employees a breakdown of their paychecks. You can accomplish both of these tasks by generating pay stubs.
Although there is no federal regulation on pay stubs, generating pay stubs for your employees can still help your business. Read on to learn how pay stubs can improve your business, provide insight on your payroll, and keep both you and your employees in the loop.
Pay stubs: The basics
A pay stub is a form that lists key details about an employee’s pay, such as taxes and other deductions taken out of the employee’s earnings.
Some key information a pay stub shows includes:
- Wages earned for that specific pay period (current pay period)
- Year-to-date amounts (YTD)
- Gross pay
- Net pay
- Numbers of hours worked
- Pay period dates
Deductions are especially important to keep track of when it comes to pay stubs. Common deductions include:
- Employee tax deductions: Federal income tax, state and local taxes (if applicable), and FICA tax.
- Benefits and other deductions: Insurance premiums, retirement plans, or charitable donations.
- Employer contributions: Employer’s contribution to employee benefits or the portion of FICA tax.
Why you need pay stubs
There are no federal regulations on pay stubs, so you may not be legally obliged to provide pay stubs for your employees. However, each state has its own laws about providing pay stubs for employees, so you will want to review state laws to ensure that your business complies by issuing pay stubs.
Even if you are not legally obligated to provide pay stubs for your employees, there are many reasons that you should.
Pay stubs are a great way to keep records of each employee’s pay as they provide all the important details you need.
If you generate pay stubs every pay period, it makes completing W-2 forms much easier. W-2 forms detail the income from your employee’s previous year’s employment, and you are legally obligated to provide a W-2 to each of your employees. Keeping pay stubs will make that process much smoother.
Pay stubs give an employee a clear picture of their earnings throughout their year. Pay stubs allow your employees to keep track of their hours, wages, deductions, and vacation pay.
Pay stubs hold you more accountable for paying your employees on time and accurately. Inaccurate pay stubs may hurt your employees, and continuously incorrect pay stubs may cause them to lose trust in you as an employer.
Pay stubs allow employees to ensure that they get the correct paycheck amount and employers a way to settle discrepancies in an employee’s pay.
Proof of income
Your employees may have to show proof of income for loan applications or leases, meaning that they may approach you to provide that proof of income. You can provide them with an employment letter, but generating one can be time-consuming.
If you provide an employee with pay stubs for each paycheck, then they already have proof of income, and no further action would be required from you.
Types of pay stubs
If you decide that pay stubs can help improve your business, you will want to make sure that you are providing the right type of pay stubs that will benefit you and your employees.
There are two main types of pay stubs: physical pay stubs and electronic pay stubs.
Physical pay stubs
Many companies are turning to software for their payroll needs, but there may still be some value in creating physical paper pay stubs.
Not everyone has access to a home computer, meaning not everyone would be able to access an electronic pay stub in a time of need, such as for proof of income when completing a rental application. Paper copies make it that everyone can access their pay stubs. Having paper pay stubs available is also a great backup for times when technology may fail.
Unfortunately, paper pay stubs are not an environmentally friendly option. Likewise, if you choose not to use payroll software, the payroll process may end up being long and tedious.
Electronic pay stubs
Electronic or paperless pay stubs provide a variety of benefits to both small businesses and their employees.
Unlike paper stubs, electronic pay stubs are an environmentally friendly option. Plus, depending on the number of employees you have, electronic pay stubs may cost you less to produce per pay period than paper would.
Electronic pay stubs allow you to keep all payroll records electronically, avoiding paper clutter, as well as providing the ability to use electronic funds transfer (EFT) to quickly pay your employees.
There are many payroll services and software that you can choose from to help create electronic pay stubs. With Form Pros, you can quickly generate paper pay stubs for your employees by answering a few questions.
In all, electronic pay stubs can help you save time and effort, as well as paper costs. The main downside is that electronic pay stubs prove limited accessibility; an employee without a home computer may not be able to access their electronic pay stubs when needed. For this reason, even if you do primarily provide electronic pay stubs, you should still be prepared to provide your employees with paper stubs upon request.
It is also important to note that some states require employers to offer paper pay stubs as a payment option or that employees may opt-out of online pay stub delivery. Employees must also consent to receive their W-2 form online, and if they do not, then they must receive a paper copy.
Pay stubs improve your business
Generating pay stubs may seem like a little more work, but it will prove to be beneficial in the long run. Not only do pay stubs provide you and your employees with payment records, but they also ensure transparency for your business. Your employees will thank you for providing pay stubs.
Form Pros can help you easily create pay stubs that are both accurate and easy for your employees to read using our easy-to-use pay stub generator. Form Pros can also help you create W-4 forms, W-2 forms, 1099-NEC for contractors, and more.
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