Creating an employee pay stub can be a very detailed, long process. Fortunately, there are many payroll services that will process and print your paychecks for you. It can still be advantageous to learn the process, as there may be a time when you didn't get your updated tax tables, your computer has crashed, your payroll company is closed and you must get a check out, or perhaps you have one or two employees and don't want to pay for a service.
Items you will need
- Federal tax tables
- State tax tables
How to Make an Employee Paystub
Determine what taxes and other deductions will be withheld. Most employees will have federal taxes withheld which include Federal Income Tax, Social Security and Medicare. Depending on which state your company resides, you most likely will withhold state income tax and state disability insurance. The employee may also have other deductions such as group health insurance if your company provides that.
Calculate the taxes. Visit the IRS website at IRS.gov and your state's labor department to obtain the rates for each tax. The federal and state income taxes will be based on tables. Use your employee's W4 to find their number of deductions and marital status. Use this and their total income for that pay period to find the amount to withhold. The rest of the taxes are based on percentages and some are limited to the first few thousand the employee makes for the year.
Create the pay stub. It is best to use spreadsheet software, but a word processing software will also work. The pay stub will need to be divided into sections. One section will provide the income with either a salary amount, or if they are an hourly employee provide the number of regular and overtime hours, rate, and total. Create another section that notes all the taxes being withheld and a section that notes miscellaneous deductions. You may also want to add a Year to Date Column that totals all the amounts over the current tax year. Include the dates of the pay period.
The IRS and some of the state websites have a calculation program that will calculate the taxes.
The employer must pay additional payroll taxes that are not included on employee pay stubs.
It is best to use a payroll service, as it is very easy to make mistakes in manual calculations.