Every employee usually waits impatiently for that day in the month when the pay for the work done recently (i.e., effort put in, dedication, commitment) will be credited to his or her account. To make sure that everything is done in a fair and compliant manner, a document known as a pay stub is also placed in the hands of employees and employers.
Pay stub – table of contents:
This small sheet of paper sent by mail or, more and more often, an electronic file (available, for example, in the human resource management system used) is a confirmation that the salary has been sent, but at the same time presents all the information about the structure and components of earnings. Below we explain exactly what such a document typically contains.
The pay stub – or what?
A payslip, also known as a statement or payroll, is a document issued by an employer to all employees over a certain period of time (e.g., every month) to provide details of salary and other employment-related components. It is an important financial document that allows the employee to understand what components were taken into account when calculating the salary transferred to the personal account.
Its preparation is the responsibility of employers – those employed in the HR department (in the so-called “hard” area) must ensure that it is part of complete and accurate documentation related to employee payroll to ensure compliance with labor and tax laws.
Basic elements of the pay stub
At the outset, it should be pointed out that the elements that should be included in a pay stub may vary depending on the laws and practices of the country or region. However, the most common is that it includes the employee’s data (name, surname and tax ID), the pay period (the interval for which the salary is due, e.g. month, quarter), employment information (working time, number of hours worked, paid vacation days, etc.), and sometimes the bank account number (in the case of electronic transfer of wages). In addition to these basic elements, there are other elements, already related entirely to financial issues. We describe them below.
The first and most important element of the pay stub is the basic salary, that is, the amount that the employee receives for the work performed in a given period (usually a month). This gross amount is always indicated in the concluded employment contract. For many people, it is the main source of income, so precise and reliable calculation of this amount is extremely essential.
In addition to basic salary, the document also describes various types of additional components. These include bonuses, awards, overtime allowances, periodic benefits (such as the thirteenth salary or holiday allowance), as well as other benefits under the employment contract or the company’s regulations (e.g., subsidies for remote work representing average amounts for electricity and Internet). Additional components can vary and depend on the industry, position or individual arrangements between the employee and employer. Their inclusion is crucial for full transparency and recognition of the employee’s commitment.
Next, the payslip contains information on deductions – such as taxes, social security, health insurance, pension contributions, labor fund contributions and other employment-related charges. Sometimes this area may include benefits (such as a sports card or private insurance), which are financed jointly by the employer and employee (and thus deducted from wages).
Deducting the appropriate amounts to specific institutions is one of the most important responsibilities of employers. The employee, in turn, should be well aware of what elements affect the final amount he will receive in his account (which is the difference between the indicated base salary and deductions).
For some countries or regions, information on tax-deductible expenses may also be included, as well as others following local regulations or requirements that may alter an employee’s salary.
Pay stub – summary
The pay stub provides the employee with confirmation of receipt of wages, but also plays a key role in understanding the structure and components of earnings received. It allows reliable monitoring of income and analysis of any deductions or additional benefits of employment.
For employers, in turn, it is an indispensable document for compliance with legal and tax regulations (to protect themselves from negative consequences of state authorities authorized to draw them). Moreover, the proper use of the pay stub contributes to a healthy relationship between the employee and the employer, strengthening trust and motivating further commitment to the job duties. For such reasons, care should be taken to ensure that the described document is prepared very carefully each time.