A pay stub is the document an employer gives an employee with each paycheque. It shows what the employee earned, what was taken out, and what they actually received — so the employee can check their pay, and the employer has a clean record of every payment made. In many countries and US states, issuing one is a legal requirement, and it protects both sides when a pay question comes up later.
This guide is written for employers issuing pay stubs to their own employees. It explains what a compliant pay stub shows, how gross and net pay are worked out, and how to keep records properly — with a worked example you can follow.
What a pay stub must show
Start with the employer: your business name and address. Then the employee: full name and employee ID, and the pay period the stub covers — for example, 1 to 15 November 2026 — plus the pay date and how often the employee is paid (weekly, fortnightly, or monthly).
Next comes the pay itself. Show the gross pay — the total earned before any deductions — and how it was calculated: hours worked multiplied by the hourly rate, or the salary amount for the period. Show regular hours and overtime hours on separate lines, because they are usually paid at different rates.
Then list every deduction on its own line, with a name and an amount: income tax, state or local tax, social security, Medicare or its local equivalent, retirement contributions, health insurance premiums, and any other authorised deduction. Finally, show the net pay — gross pay minus all deductions — which is the amount the employee actually receives. A pay stub that hides deductions in a single lump sum is not a proper pay stub: the employee must be able to see exactly what was taken out and why.
How gross pay is worked out
For hourly employees, gross pay is hours worked multiplied by the hourly rate. An employee who works 40 hours at $15.00 per hour earns $600.00 gross for that week. Overtime is usually paid at a higher rate — commonly time and a half — so 5 overtime hours at $22.50 per hour add $112.50, bringing the gross to $712.50.
For salaried employees, gross pay is the salary divided by the number of pay periods: $48,000 a year is $4,000.00 a month, or $1,846.15 a fortnight (48,000 divided by 26).
Bonuses, commissions, and allowances are part of gross pay too, and should be shown on their own lines so the employee can see what each part of their pay was for.
How deductions are worked out
Deductions fall into two groups. Mandatory deductions are required by law: income tax, and social security and Medicare contributions (or your country’s equivalents). These are calculated from the gross pay using the rates that apply in your location — and those rates change, so always use the current figures from your tax authority.
Voluntary deductions are ones the employee has agreed to: retirement fund contributions, health insurance premiums, union dues, or a loan repayment. These must be authorised by the employee, in writing, and you should keep that authorisation on file. Never deduct something an employee has not agreed to — an unauthorised deduction is a fast route to a dispute.
Net pay is simply gross pay minus the total of all deductions. If the maths on a stub does not add up, the employee will notice — and they should. Show every figure, so anyone can check the calculation in seconds.
Worked example: gross $1,200, deductions itemised, net pay
Suppose an employee earns a gross pay of $1,200.00 for the pay period. The deductions are:
- Federal income tax — $96.00
- State income tax — $36.00
- Social security (6.2% of $1,200.00) — $74.40
- Medicare (1.45% of $1,200.00) — $17.40
- Retirement contribution (5% of $1,200.00) — $60.00
Add the deductions: $96.00 + $36.00 = $132.00; $132.00 + $74.40 = $206.40; $206.40 + $17.40 = $223.80; $223.80 + $60.00 = $283.80. Total deductions are $283.80.
Net pay is gross pay minus total deductions: $1,200.00 − $283.80 = $916.20. So the pay stub shows gross pay $1,200.00, total deductions $283.80, and net pay $916.20 — the amount the employee actually receives. The tax and contribution rates in this example are illustrative; always apply the rates that are current in your location.
Year-to-date figures and record-keeping
A good pay stub also shows year-to-date totals: total gross pay so far this year, total tax withheld so far, and total deductions so far. These help the employee check their annual tax position and help you reconcile your payroll at year end. If your payroll system tracks them, include them on every stub.
Keep a copy of every pay stub you issue, for as long as your country’s rules require — commonly several years — and store them securely: they contain names, pay rates, and tax details. If you use payroll software, make sure it is up to date with current tax rates before each pay run.
How to use the pay stub generator
Open the pay stub generator, enter your business details, the employee’s name and ID, and the pay period. Enter gross pay directly, or enter hours and rate and let the tool work it out. Add each deduction as its own line, and the tool shows the live pay-stub document — gross pay, itemised deductions, and net pay — ready to print or save as a PDF. If you also need to bill a client for the work your team did, the invoice generator produces the matching invoice.
Common mistakes to avoid
The most common mistake is lumping deductions together so the employee cannot see what was taken out. The second is using last year’s tax rates — always check the current figures before a pay run. The third is forgetting overtime or bonuses, which underpays the employee. And the fourth is poor record-keeping: if you cannot produce a past pay stub when an employee asks, a tidy filing system would have prevented the problem.
Frequently asked questions
Do I have to give my employees a pay stub?
In many countries and US states, yes — employers are legally required to provide a written statement of pay with each payment. The exact requirements vary by location, so check the rules where your business operates. Even where it is not legally required, issuing a pay stub is good practice and protects you if pay is ever disputed.
What is the difference between gross pay and net pay?
Gross pay is what the employee earned before anything was taken out. Net pay — also called take-home pay — is what is left after all deductions: gross pay minus tax, social security, Medicare, retirement, and any other authorised deductions. The employee receives the net pay.
Can an employee ask for a copy of an old pay stub?
Yes, and you should be able to provide one. Keep copies of every pay stub you issue for as long as your local record-keeping rules require, stored securely, so you can find a past stub quickly when asked.