How to Make Pay Stubs for Employees as a Small Business

The Small-Business Pay Stub Workflow

To make pay stubs for employees, start with the payroll run, not the document. A pay stub is the employee-facing summary of a payroll run: the calculation, tax deposit, filing, and recordkeeping process sits behind the stub, and the stub just reports it.

The workflow runs in one direction: collect employee and pay-period information, compute gross pay, apply taxes and deductions, arrive at net pay, issue the stub, and retain the records that prove the math. Following that sequence prevents the most common mistake, which is starting with the PDF before the payroll records are in order.

1. Collect Employee and Pay-Period Details

Every stub needs the basics: employee name, employer legal name, employer address, pay period, pay date, pay frequency, and work state. For hourly workers, you also need hours worked each day or week, the regular rate, overtime hours, and any different rates that apply to different work.

For salaried employees, confirm whether the worker is exempt or non-exempt, because salary does not automatically confer FLSA overtime exemption. The exemption tests depend on salary basis, salary level, and job duties. If the employee is salaried non-exempt, you still need hours and overtime math.

2. Calculate Gross Pay

For hourly employees, regular gross pay is hours times rate. Overtime is generally hours over 40 in a workweek at one and one-half times the regular rate under the FLSA, unless a state rule is more protective. California, for example, has daily overtime rules that go beyond the federal weekly standard.

For salaried employees, gross pay is the annual salary divided by the pay frequency: 52 weekly checks, 26 biweekly checks, 24 semi-monthly checks, or 12 monthly checks.

Add any other earnings separately: bonuses, commissions, reported tips, paid time off, holiday pay, taxable reimbursements, and shift differentials. Keeping each earning type on its own line makes later auditing straightforward; lumping everything into "salary" does not.

3. Calculate Taxes

For W-2 employees, federal income tax withholding is determined by the employee's Form W-4 and the tables in IRS Publication 15-T. On top of that, Social Security runs at 6.2% of the employee's wages up to the annual wage base, and Medicare runs at 1.45% on all wages with an additional 0.9% withheld once wages in the calendar year exceed $200,000. Add state, local, and any Additional Medicare Tax lines as applicable, and keep each one labeled separately on the stub. Paystub Pilot can calculate these lines automatically.

4. Add Deductions

Label every deduction. Common lines include:

• Health insurance
• Dental or vision insurance
• Traditional 401(k)
• Roth 401(k)
• HSA or FSA
• Garnishments
• Union dues
• Post-tax insurance
• Loan repayments or advances

The pre-tax versus post-tax distinction affects tax calculations. A traditional 401(k) deduction reduces federal taxable wages but does not reduce Social Security or Medicare wages. A Roth 401(k) deduction does not reduce federal taxable wages. Health plan premiums under a Section 125 cafeteria plan generally reduce both federal income tax and FICA wages. Using generic labels for all deductions makes W-2 reconciliation harder.

5. Issue the Pay Stub

The stub should contain enough information to reproduce the paycheck from scratch: pay period and pay date, each earning type at its own rate, each tax line and deduction line labeled separately, net pay, and YTD totals. For non-exempt workers, hours and rates are required. Employer and employee identification round out the standard fields.

State rules add specificity on top of that federal baseline. Pay stub requirements by state vary considerably: California and New York mandate detailed itemized statements, while other states are far less prescriptive.

6. Keep Payroll Records

DOL Fact Sheet 21 lists the records covered employers must keep for non-exempt workers, including hours worked, wage rates, additions and deductions, total wages paid, pay dates, and pay periods. Payroll records generally need to be retained for at least three years, with wage-computation records retained for two years.

The practical test is whether the business can explain, months later, exactly why a specific employee's net pay equaled a specific amount on a specific payday.

When a Generator Is Enough, and When It Is Not

A pay stub generator works well for a one-person business, occasional contractor-style income summaries, or a very small W-2 payroll where the employer separately handles tax deposits, Form 941, state filings, and unemployment insurance. Using a generator does not transfer payroll tax obligations: the employer remains responsible for depositing and filing payroll taxes correctly.

Full payroll software is worth considering once you have multiple employees, benefits deductions, garnishments, multi-state workers, paid leave balances, new-hire reporting, or recurring payroll tax filings. What tips the decision is the volume of compliance work, not the stub document itself.

If you use a generator, treat it as the presentation layer. Keep the payroll register, tax deposit records, time records, and deduction authorizations in a separate file.