We all love payday, but may not have a solid grasp of all the specifics listed on the paycheque. At first glance there seems to be a lot of different numbers and titles; which can be confusing when you aren’t sure about what they mean.

Pay stubs are written pay statements that show each employee’s paycheque details for each pay period. Pay stubs are also called paycheque stubs, wage statements, or payslips. If your business provides physical paycheques, typically, the pay stub is attached or included with the cheque. If your business uses direct deposit, employees may have to access their pay stubs via an online portal.

What is a pay stub?

A pay stub, also known as a paycheck stub or pay slip, is a document issued by an employer that outlines an employee’s earnings for a specific period and details various deductions taken from those earnings. The pay stub is usually attached to the paycheck or provided separately, especially when payments are made via direct deposit.

Importance of pay stubs

Pay stubs serve multiple important purposes:

• Transparency: They provide a transparent breakdown of how the employee's wages are calculated.
• Record-Keeping: Essential for financial record-keeping and for employees to manage their finances.
• Compliance: Required by law in many jurisdictions, ensuring adherence to employment standards.
• Dispute Resolution: Help resolve any discrepancies or disputes regarding pay.

Employees should be able to see the kinds of withholdings and deductions their employers take out of their gross pay. And having it all laid out on the page can help employees and employers avoid unnecessary confusion or confrontation.

Components of a pay stub

It is crucial that both employers and employees know the different elements of a pay stub, since it brings transparency and precision in your financial and payroll transactions and allows both parties to ensure that the numbers are correct and there are no discrepancies. Here are some common items you might expect to see on a pay stub:

Employee information

This section includes the employee's name, address, Social Insurance Number (SIN), and employee ID number.

Employer information

Here you will find the employer's name, address, and contact information.

Pay period

The pay period specifies the start and end dates for which the employee is being paid, along with the date of payment.

Gross wages

Gross wages are the full amount an employer pays before deductions. This pay often includes more than the employee’s regular wages. Overtime pay and additional income, such as paid time off, bonuses, and payroll advances, are also included under gross wages.

Gross wages are calculated differently for salaried and hourly employees. To calculate an hourly employee’s gross wages for one pay period, multiply their hourly pay rate by their number of hours worked. To calculate a salaried employee’s gross pay for a single pay period, divide their annual salary by the number of pay periods in the year.

Typically, pay stubs for hourly workers show the number of hours the employee worked. Salaried employees’ pay stubs may also show the number of hours they recorded working if they track their time. If the employee works over 40 hours in a week and is eligible for overtime pay, those hours should be on their pay stub

Year-to-date

Year to date is used on pay stubs to keep track of the amount of something since the first day of the year or the first day the employee started working in the year. Many pay stubs will keep a running total of your employees’ earnings and deductions for the year. For example, if an employee’s YTD earning on March 1st is $9,000, that means from January 1st to March 1st, they have earned a total of $9,000.

Deductions

Deductions reduce the gross pay to arrive at the net pay. Common deductions include:

• Taxes: Federal and provincial income tax, Canada Pension Plan (CPP), and Employment Insurance (EI).
• Benefits: Health insurance, retirement contributions, and other voluntary benefits.
• Employee Purchases: Any amounts deducted for merchandise or services bought through the company.

If you are unsure how much you have to deduct from your employees paycheque, try our payroll calculator for an accurate result every time.

Contributions

Contributions are another kind of deduction. But if the contribution comes from the employer, it may be included in the employee’s gross wages. For instance, say an employee contributes 3% of every paycheque to a RRSP, and their employer matches that contribution. The employee’s contribution would be a deduction from their paycheque, while the employer’s contribution would be listed as part of the employee’s gross wages.

Contributions will vary depending on the benefit opportunities offered by the employer. For instance, an employee might request that a small percentage of their paycheque be put toward an employee stock purchase plan (ESPP). They might make contributions to a pension or have a small sum taken out of each paycheque as a nonprofit donation.

Net pay

Net pay is the amount left over after deductions have been taken out of the employee’s gross pay. Net pay is often called take-home pay. It’s the amount the employee receives when they are paid, either by direct deposit or a paper cheque.

Depending on the size of the deductions, an employee’s net pay may be significantly lower than their gross pay. On the employee’s pay stub, net pay is recorded both for the pay period and cumulatively for the year.

Pay Stub Examples

If your business is small and doesn’t offer many benefits, your employees’ pay stubs are going to look pretty simple. Here’s what a simple pay stub might look like:

How Long Should You Keep Pay Stubs?

Employers should hold on to copies of employee pay stubs or other payroll records for at least six years. That’s because the CRA requires employers to “keep records of employment taxes for at least six years after filing the [fourth] quarter for the year.” Most reliable payroll services provide the ability to hold payroll records.

If your employment tax records are kept in another place, you would still want to hold on to pay stubs and payroll records for at least six years.

All of the information you’re required to keep may go beyond what’s included in an employee’s pay stub. Still, it’s good to have a record of each payroll period and paycheque, should that information be called into question.

Do You Have to Give Your Employees a Pay Stub?

Yes, it is required by law to give your employees a paystub every pay period.

Why Do Employees Need Pay Stubs?

There are several reasons an employee might need pay stubs. So it’s a good idea to provide them, even if your province does not require it. Here are some examples:

• To rent or buy a house
• To buy a car
• To get a credit card
• To apply for a loan
• To file a tax return if the employer has not issued a T4

Common pay stub mistakes to avoid

Even minor errors on pay stubs can lead to significant issues. Here are common mistakes:

• Incorrect Employee Information: Ensure all names, addresses, and SINs are accurate.
• Misclassified Earnings: Distinguish clearly between regular pay, overtime, and bonuses.
• Incorrect Deductions: Double-check all statutory and voluntary deductions.
• Dispensing without Proper Dates: Ensure pay periods and payment dates are correctly stated.

Boost efficiency with digital solutions

Digital business and payroll solutions like QuickBooks facilitate this process end-to-end by automating pay stub creation, allowing employees to access their pay stubs anytime and anywhere, and reducing the risk of lost or tampered documents with secure digital storage. This can help you stay compliant while staying efficient so you save time and can focus more attention on running your business.

Disclaimer

Money movement services are provided by Intuit Canada Payments Inc.

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