How to Create a Pay Stub: A Step-by-Step Guide for Small Businesses
Every time you pay an employee, they should be able to see exactly how their pay was worked out. That record is the pay stub, and getting it right protects you as much as it helps them. It shows what you paid, what you withheld and why, and it is the paper trail you will lean on if a payroll question ever comes up.
This guide walks through how to create a pay stub from scratch: what it has to include, how to calculate each line, a worked example with real numbers, and the quickest ways to produce one without a spreadsheet headache.
What a pay stub should include
At a minimum, a complete pay stub lists:
- Employer details: business name and address.
- Employee details: name, and usually the last four digits of their Social Security number (never the full number).
- Pay period and pay date: the dates the pay covers and the date it was paid.
- Earnings: hours worked and hourly rate, or the salary for the period, plus any overtime, bonus or paid time off.
- Deductions: federal income tax, Social Security, Medicare, state and local taxes, and any benefits such as health insurance or a 401(k).
- Net pay: what the employee actually takes home.
- Year-to-date totals: running totals for earnings and deductions since January 1.
Many states add their own requirements, so check yours before you settle on a format.
Do you have to give employees a pay stub?
Federal law does not require employers to give employees a pay stub. Many states do, however, and some set specific rules for what it must show and whether it can be electronic. California, New York and Illinois are examples of states with their own pay statement rules.
Even where it is optional, a pay stub is good practice. It heads off disputes, and employees often need one to rent a home, apply for a loan or confirm their income. Check your state labor department's current rules, or start from our state paystub guides, which cover state-specific tax details.
Step 1: Work out gross pay
Gross pay is what the employee earned before anything is taken out.
- Hourly: hours worked x hourly rate. Overtime hours are usually paid at 1.5 times the regular rate for non-exempt employees.
- Salary: annual salary divided by the number of pay periods (26 for biweekly, 24 for semi-monthly, 12 for monthly).
- Extras: add bonuses, commissions or paid time off for the period.
Step 2: Subtract pre-tax deductions
Some deductions come out before income tax is calculated, such as traditional 401(k) contributions and certain health insurance premiums. Subtract these first, because they lower the pay that income tax is based on. Note that 401(k) deferrals still count as wages for Social Security and Medicare.
Step 3: Calculate payroll taxes
- Social Security: 6.2% of wages, up to the annual wage base.
- Medicare: 1.45% of all wages. High earners pay an extra 0.9% above $200,000 in a year.
- Federal income tax: based on the employee's Form W-4 and the withholding tables in IRS Publication 15-T.
- State and local taxes: these vary widely. Some states have no income tax, and others add items such as disability or paid family leave contributions.
Your business also pays a matching employer share of Social Security and Medicare. That cost is yours and does not appear as a deduction on the employee's stub.
Step 4: Subtract the rest to get net pay
Take gross pay, subtract every deduction, and what remains is net pay.
A worked example
Say an employee earns $2,000 gross for a biweekly pay period. The federal and state figures below are illustrative only, since real amounts depend on the W-4 and the state.
| Line | Amount |
|---|---|
| Gross pay | $2,000.00 |
| Social Security (6.2%) | -$124.00 |
| Medicare (1.45%) | -$29.00 |
| Federal income tax (example) | -$150.00 |
| State income tax (example) | -$60.00 |
| Net pay | $1,637.00 |
The year-to-date columns would then add this period to the totals from earlier pay periods.
Ways to create a pay stub
- Payroll software. Services such as Gusto, QuickBooks Payroll or ADP calculate taxes, issue pay stubs, file returns and make tax deposits. This is the best choice once you have regular employees.
- A spreadsheet. It works, but you must keep tax rates and wage bases current and double-check every formula.
- A pay stub generator. If you need a clear, professional stub from numbers you already have, a generator is the fastest route. 247Paystubs works out federal, state and payroll taxes from your inputs and gives you a PDF in minutes.
One important point: a pay stub generator creates the document. It does not file payroll returns or deposit taxes with the IRS or your state. Those obligations remain yours, so use payroll software or a payroll provider if you need that handled.
Common mistakes to avoid
- Showing the full Social Security number instead of the last four digits.
- Using last year's tax rates or wage base.
- Forgetting to reset year-to-date totals in January.
- Leaving out overtime or treating non-exempt employees as salaried.
- Mixing up pay date and pay period dates.
Frequently asked questions
Is a pay stub the same as a payslip?
Yes. Pay stub, payslip and earnings statement all mean the same thing.
How long should I keep pay records?
Federal rules generally require keeping payroll records for at least three to four years, and some states require longer. Confirm the current requirement for your state.
Do independent contractors get pay stubs?
Not usually. Contractors are typically paid against invoices and receive a Form 1099-NEC where the payment threshold is met, rather than a pay stub.
Can I send pay stubs electronically?
In most states, yes, if the employee can easily access and print them. A few states have specific consent rules, so check yours.
A good pay stub is simple: clear earnings, correct deductions, an accurate net pay figure and running year-to-date totals. Work through the steps above and you will have one that is accurate, easy to read and defensible.
Ready to create one? Try the 247Paystubs generator, choose your state, and get a clean pay stub PDF in minutes.