What is a Pay Stub?
Usually, when independent contractors and employees are paid, they only receive a check with their salary. With this check, employers compensate them for the time they worked for the company. A lot of employers normally ask themselves what is a pay stub, so we are here to answer that question.
In this article, you will learn what pay stubs are used for. Subsequently, employers will know how to fill their employees’ pay stubs and what is their importance for a company. Pay stubs are common. Especially if your employees need to know the details about their salary. Let us see:
- What is a Pay Stub?
- What are Pay Stubs used for?
- How should employers fill a Pay Stub?
- Why is Pay Stubs important?
- How long should employers keep their employees’ Pay Stubs?
- How can EOR Middle East help you?
1. What is a Pay Stub?
When you are in charge of managing a company’s payroll, you need to know what is a pay stub. A paycheck stub, also known as a pay stub, is a paycheck addition that provides details of an employee’s present pay.
Generally, pay stubs includes everything about the employees’ payments, net pay, total amount, employer contributions (such as health insurance and other benefits), tax deductions, pay rate, and other crucial information about the employer and employee.
The individual or PEO agency that manages a company’s payroll is in charge of creating the pay stubs for each employee. Every staff member needs to be aware of what pay stubs are for to know how much they are compensated at the end of the month, year, or assignment.
Due to the technology being more advanced, pay stubs have changed from their physical form to digital. In this way, employers have it easier as there are many new solutions, such as payroll outsourcing, that take care of providing pay stubs easily.
2. What are Pay Stubs used for?
After learning what is a pay stub, it is important to know what are pay stubs for. The main purpose of pay stubs is to file and show detailed information of an employee’s pay. Staff members need pay stubs to verify their payment information. Thus, making sure that they are not being underpaid.
In addition, pay stubs are proof of employment and can be used if necessary in any legal query. All staff members have the right to receive their pay stubs. It does not matter if they are employees working part-time or full-time. However, most times pay stubs are replaced by invoices for freelancers or 1099 employees.
On the other hand, pay stubs are used for helping employees understand taxes, employer contributions, tax deductions, and other things that affect their final payment. Also, staff members may need pay stubs to:
- Apply to buy a property
- Obtain loans from a bank entity
- As proof of employment
- Get a new job in the UAE
3. How should employers fill a Pay Stub?
Once you know what is a pay stub, it is now time to know what is on one. Employers can put as many details as they want to help their workforce keep track of their taxes, payments, and deductions.
Most companies relieve themselves from this burden by acquiring the services of an employer of record. Which helps them with this and other managerial duties. Nevertheless, when they do it by themselves it can be quite difficult. Typically, pay dubs includes:
3.1 Gross Wages
Gross wages are the initial topic of your staff members’ pay. Pay stubs are used for letting employees know how much they make periodically. Therefore, gross wages let employers know how much they owe their workers before taking out deductions and taxes. It is important to know that if an employee has a nontaxable income you should include it under gross wages.
To calculate your workforce’s gross wages, you have to know first if they are hourly or salaried. To know what is the pay stub’s gross wage of salaried employees you must divide their yearly salary by the number of payment periods through the year. In contrast, for hourly staffers, you must multiply their hourly pay rate by the number of hours worked in the pay period.
Commonly, pay stubs showcase the gross pay details in two columns, year-to-date gross pay, and current gross pay. Additionally, it may include this information:
- Total hours worked: pay stubs are used for showing employees their total number of hours worked in a particular period. Sometimes, employees can work diverse types of hours, such as overtime, regular, and double-time. Employers have to include the total of hours worked for each type of period on the pay stub. They should make sure that each hour worked is in its section.
- Pay rate: employers have to include the staff members’ pay rate on each pay stub. For salaried workers, showcase the salary amount of compensation for the pay period worked. Whereas for hourly employees, note each worker’s hourly pay rate. Moreover, make sure you record employees’ separate pay rates on their pay stubs for any double-time, overtime, or any other type of work period.
3.2 Employee Taxes
Taxes and other deductions minimize the employee’s final earnings. Hence, this is what pay stubs are for, showing employees the things that reduce their income. A pay stub, details taxes so staff members can view all the tax amounts withheld from them. There are places where taxes are exempt. For example, in the United Arab Emirates employees do not pay certain taxes.
The most common taxes represented in pay stubs are:
- Federal Income Tax
- State Income Tax
- Local Income Tax
The majority of the companies in the Middle East hire HR management solutions to deal with this kind of inconvenience. These agencies know the local laws and other requirements to make sure that your company remains compliant.
Learning what is a pay stub and being aware that their main use is to inform workers of their income details is very beneficial. Knowing how to make pay stubs the right way will take some stress out of your work life.
When filling pay stubs is important to include deductions. These deductions change depending on the benefits a company provides. Deductions that must be included on your staff members’ pay stub are:
- Voluntary deductions, such as charitable contributions and donations.
- Deductions for staffer benefits, for example, health savings accounts, contributions to retirement savings, health insurance, and life insurance.
- Involuntary deductions and payments toward loans.
3.4 Employer Contributions
Depending on your type of business, there are some items on your staff members’ pay stubs that you should not deduct from their gross pay amount. These contributions can be premium insurances, savings, or retirement plans.
Pay stubs are used for including these contributions and they should be listed for individual pay periods and year-to-date totals. Similarly, employers should also include their payroll taxes for each of their employees.
3.5 Net Pay
The net pay is the amount of money left over after you subtract deductions and taxes from your workforce’s gross pay. If your employees receive a nontaxable income you should include that income after deducting deductions and taxes.
In the end, when you learn well what are pay stubs they become easier to fill. Nonetheless, with the support of a professional employer organization, these duties can be lifted from your shoulders. These efficient agents take care of keeping your company under compliance. As well as providing many other services that will help you enhance your operations.
3.6 Other Information
When making pay stubs for staff members, it is important to include certain information. You must include the employee’s information, such as their ID Card number, address, name, and other pertinent information.
On the other hand, it is important for you as an employer to include the name of the business, legal address, contact information, and registration number. Additionally, you should include bonuses or other types of remunerations when necessary.
4. Why are Pay Stubs important?
Once employers learn what is a pay stub and what are pay stubs used for, their relevancy within a company becomes clear. Pay stubs are important for companies to remain compliant with local laws. Plus, employees can use them as records of their wages and by reclaiming them, workers assure that their payments are correct.
On the other hand, pay stubs are relevant for employers in case there are any discrepancies with any employee’s payment. Managers can use them to answer any queries about payments that can be solved by looking at the pay stub.
Pay stubs are mandatory in the Middle East. So, if employers do not provide them they can suffer legal consequences depending on the region. Even remote teams have the right of asking for their detailed pay stub.
If your company does not give you a pay stub with every paycheck, you must contact your company’s human resources team to ask for it. Sometimes, companies require staff members to submit a formal application to receive copies of their pay stubs.
Depending on the organization, pay stubs may be available to view online through an employer of record. These organizations allow employees to enter the software and see their detailed information in no time.
5. How long should you keep your Pay Stubs?
There are no guidelines on how long should companies keep their staff members’ pay stubs. Usually, organizations keep their copies of pay stubs or other payment records for a minimum of three to four years. This is in case they require it for any tax documentation.
Even when pay stubs are used for keeping a record of your income, it is not a document that you, as an employee, need to store forever. Generally, employees retain their pay stubs for a year or two, just in case they need them in any tax difficulty.
HR management agencies store pay stubs in a cloud system and they do not delete them unless you ask them to. Besides, these agencies usually offer other types of services to companies, such as immigration services and more.
In summary, managers need to know what is a pay stub to provide all the necessary information to these agencies. As they will take charge of sufficing your payroll and filling checks with their respective pay stubs proficiently.
6. How can EOR Middle East help you?
If you are looking to apply for a company to provide your staff members’ pay stubs and other payroll responsibilities, EOR Middle East is here for you. We offer the greatest payroll solutions company in the region. Delivering our services in places such as:
EOR Middle East has years of experience in the market, helping companies grow and develop into new regions. Our company has more than 800 satisfied ratings, a 98% success rate, and many accolades that make us the biggest consultancy agency in the UAE. Plus, we count on a specialized team of agents that will make your experience with us so much better.
Our company is your best option to enter a new market. EOR Middle East provides a tailored selection of services to increment your productivity in a short time. And also, we offer relocation services to smoothly transition into any Middle Eastern location.
Would you like to suffice your payroll with EOR Middle East? If you want us to help you with your payroll and other HR operations, please reach us via email at [email protected]. Our agents will gladly answer any of your queries regarding our services.
On the other hand, if you are looking to be part of the company of your dreams, you can go to thetalentpoint.com and submit your resume or CV. Or, if you would like, email us at [email protected]. Ultimately, we will make sure to review your application and help you find the perfect job position in no time.