First, we will explain the payroll and pay stubs, as terms, so we can determine the similarities and differences too.
Payroll is the complete list of employees in a company, who have the right to salary and other benefits arising from their employment. This means that in that list there are records for paid taxes, bonuses, as well as paid salary and overtime work. This can be done inside the company or by an external accounting company.
It is necessary for them to always keep a record of all this so that they can have proof that they are working legally.
A pay stub is actually a piece of paper that every employee gets along with the paycheck. With the help of a pay stub, each employee can have an insight into how much was paid, how much money is cut for taxes and insurance, and also how many bonuses and salary supplements are paid. This document is actually issued based on the data in the payroll. If things are properly integrated with each other, the payroll software can extract a document for each employee individually – which is called a pay stub.
Keep in mind that this should not be confused with a paycheck, which is only for the ongoing period.
Why is a pay stub useful?
This document containing detailed information is needed by each employee to have an insight into their current income and expenses. Therefore, every employer is obliged to issue this document in certain time periods. It can be every year, every month, every six months, every few weeks, every quarter, etc.
With the help of software like TheBestPaystubs you can easily generate this document and automate the process. Thus, according to the given parameters and the entered data, each accountant can submit a report to the employee in time.
This increases the transparency of each company and each employee knows exactly how much money he took in a certain period, based on work performed for the same period.
Therefore, we can say that pay stub is not the same as payroll, although one derives from the other and contains practically the same data. But the biggest difference is that the pay stub is for the needs of the employee, while the payroll is the records kept by the employer, ie the accounting department.
Pay stubs can be a physical documents given to an employee. It can also be submitted electronically, in its file, or sent to an email address.
To whom is the pay stub issued?
This is a document that is mandatory for everyone who performs work tasks for a particular company, whether they are full-time or part-time employees.
Of course, you must know that freelancers and external collaborators receive invoices with information about the work done, ie they are not issued a pay stub. The reason for this is that the obligations regarding insurance and taxes do not fall on the employer.
What components are in this document?
The main component is the gross pay, ie the total amount paid on behalf of the employee. This includes all expenses before deducting taxes and other deductions. You will also find information on sick days, paid vacations, bonuses, salary additions, fees, and everything else that includes the costs of the company for you.
The following are deductions, which are deducted from gross pay (gross income). These are costs that the employee does not receive, because the company has already paid them on his behalf, or receives them, but it is known what they should be spent on.
Of course, you get information on the basics of each tax paid. Wage garnishes are all fees that are deducted from the salary, such as debts to the bank, child support expenses, or payment of student debts. Finally, the last parameter is net pay, ie the amount that the employee actually takes for the period for which the pay stub is valid.
Why should pay stubs be issued to employees?
Employers have no legal obligation to do so. But being a law in one country can be a crime in another. Therefore, the issuance of this document is recommended for all those who want to be up-to-date on how their money is spent. These documents are also useful for those who need to borrow a new home or special treatment for treatment. There are many examples and it is always good to issue a pay stub for certain periods of time, instead of waiting for the need to arise and issuing it in a retrograde way.
These documents can also be useful in the event of a dispute between employees and employers. In fact, it contributes a lot to maintaining a high level of transparency, without causing any doubts, without any basis.
Every company should strive to maintain professionalism at the highest level. In this way, they remain relevant among employees and, of course, in competition. Show your employees that you value their hard work so that any information about their employment is readily available to them.
Do not let them have to wait for you to apply for a loan, or prove that they are eligible and competent to support their children. Of course, find out if you have a legal obligation to do so, as many accounting firms are unaware of this. There are several states in the United States where the issuance of these documents is not mandatory.
However, if you want to protect your credibility and strengthen your strong market position, make sure all employees fulfill their rights.
Of course, do not confuse pay stubs with paycheck and payroll. These are completely different ways of running a company’s accounts.
Other terms under which you will recognize pay stubs are a salary statement, pay advice, paycheck stub, payslip, or wage slip. This means that although they have a similar meaning, in fact, they are not the same document with either a paycheck or a payroll.
We hope that now you understand the difference after we elaborated the complete topic for you.