Whether you have just one employee or hundreds, you must deal with payroll at least once a month. If you have temporary employees, collaborators, or outsourced employees, the payroll period may vary from one day to a few months (e.g., pay per project). As a result, you need to know how many hours each employee worked, whether they did overtime, and if so, for how many hours, and whether they had paid time off and for how long. It would be best to consider other situations influencing payroll, such as sick days, particular time off (e.g., maternity/paternity leave), and working on weekends or public holidays.
Mastering payroll doesn't have to be a daunting task, especially if you run a small business without a dedicated HR department. Discover the power of pay stub templates, designed to simplify your payroll process and empower you to manage your business more efficiently.
A pay stub is a document, often a Word file or Excel spreadsheet, that includes all the details about an employee's earnings over some time. For full-time and part-time employees, the period is usually one month. However, project-based staff and collaborators may vary from a few days to a few months.
A pay stub proves worked hours, overtime, and paid time off. The employer provides the pay stub alongside the paycheck or payment receipt. It is also used for taxes and accountancy purposes.
By providing pay stubs, you not only ensure compliance with labor legislation and keep your books in order, but you also demonstrate your commitment to your employees' satisfaction. Pay stubs offer transparency in the payroll process, helping your employees understand their earnings and benefits, and feel valued in your organization.
Although the importance of a pay stub is obvious, why you should use a pay stub template is not. It's good practice to use a template because generating pay stubs is a recurring task - you will do this every month. Your employees will become familiar with the format, which reduces confusion and time spent explaining what everything means. It will also be easier for them to notice potential mistakes and inform you.
Using a pay stub template benefits your employees and helps you maintain accurate employee payment data. This accuracy is crucial for analyzing expenses, predicting future costs, and managing project budgets effectively. It also showcases your dedication to achieving financial transparency and responsibility.
Most pay stubs include information about employees' earnings, tax deductions, and net incomes. However, an employee typically earns more than one type of income. For example, they get paid differently for regular hours and overtime. They may also benefit from different tax deductions, such as a slight decrease when they are on maternity leave. So here are the essential elements you should consider including in a pay stub.
Like any official document, a pay stub includes the name of the person who created it, the employee's name, and the pay period to which it applies. It may also include other contact data, such as a contact person in case of an error, the employee's bank account where the earnings are deposited, and the employee's physical address where the documents are sent.
Gross earnings refer to the money an employee receives for their work before applying tax deductions. They sum all earnings, such as regular hours, overtime, and paid time off. Typically, they are computed using an hourly rate, but for project-based employees and collaborators, they may be fixed amounts.
For example, if your employee works 40 hours weekly at $15 per hour, their weekly gains gross would be $600.
Discover how to calculate the hours worked.
Deductions refer to how much of an employee's gross earnings go to taxes, mandatory social insurance, retirement funds, etc. Each country and even each jurisdiction has its system of deductions. Exceptions may apply as well. For example, in some countries, people on maternity/paternity leave are excepted for social insurance deductions. Parents may also benefit from smaller taxes. Monitor the changes in deductions in your country and update the pay stub accordingly.
Net earnings refer to how much money an employee receives and should match the paycheck. The difference between gross earnings and deductions may differ slightly from month to month based on the employee's activity.
For example, if an employee's gross earnings are $1000 and their deductions are $200, their net earnings would be $800.
Learn more about the difference between net and gross pay.
If your employees benefit from different rates for different activities, you need to include the rate list in the pay stub. For example, day shifts may have a lower hourly rate than night shifts. Doing overtime or working on weekends and public holidays may also be paid more. In some countries, sick days and maternity/paternity leave are paid less than regular hours. Include all relevant information so your employees know exactly why they receive a certain amount each month.
For instance, if your employee works a day shift at an hourly rate of $10 and a night shift at an hourly rate of $15, their pay stub should reflect these different rates.
Employees love to know how many paid leave days they have remaining. Since paid time off may influence monthly income due to different taxation, many small businesses choose to include the paid time off balance in the pay stub. It's a small table that shows how many days off the employee is entitled to, how many they used, and how many remain.
Related: PTO accruals.
Year-to-date amounts are computed from the start of the current year to the current date. They represent the total gross earnings, deductions, or net earnings an employee accumulates over time. Their purpose is tax-related and informative (e.g., how much money an employee transfers to their retirement fund).
For example, if your employee earned $10,000 and deducted $2,000 from January to June, their year-to-date gross earnings and deductions would be $10,000 and $2,000, respectively.
Download the free pay stub template that fits your employees' work schedule. It doesn't have to be a complicated form. Customize it with your employee's name, reporting period, currency, and rates, creating your personalized template. We provide free pay stub templates with a calculator to speed up your work.
Tip: Our free pay stub templates are Excel spreadsheets. If you pay your employees monthly, create a new sheet for each month and keep everything in one place. It will be much easier to calculate year-to-date amounts. Excel spreadsheets are a popular choice for pay stub templates because they are easy to use, can handle complex calculations, and provide a clear overview of your payroll data.
This Excel model is perfect for employees who work for the same hourly rate. All the information is on one row, and the sums are computed automatically.
This template is ideal for managing paychecks for regular employees who work for the same hourly rate and are entitled to paid time off. The template includes the employee's paid time off balance for more transparency.
If your employees work in shifts and often do overtime, you need a pay stub template that considers it. Customize overtime categories and hourly rates. The template automatically computes the totals for each and, of course, the overall total.
Pay Stub Template with Overtime
The pay stub template with overtime and PTO is all you need for your small business. It covers all situations, from overtime categories to PTO categories. It also calculates totals and shows the PTO balance.
Pay Stub Template with Overtime and PTO
FAQ
Why do you need pay stub templates?
You need pay stub templates to manage payroll and taxes, inform your employees, and comply with labor legislation. You also need them to implement a straightforward payroll procedure that saves time and helps avoid errors. Templates are a good choice for repetitive, time-consuming tasks. Furthermore, as you have to provide a pay stub alongside the employee's paycheck, it's better to use the same structure every time to win the trust of your employees.
What is the difference between a pay stub, a paycheck, and an invoice?
Although they all deal with money, a pay stub, a paycheck, and an invoice are separate documents. For clarity, check out the following table that contains all the differences: