5 Reasons Your Small Business Needs Pay Stubs


A small business can't function without a motivated team. If you want to keep your team happy, you need to pay your employees on time and for the right amount of money. 

Unfortunately, many small business owners fret over their payroll process and employment issues such as:

  • How do you know when worker deductions are accurate?
  • How do you make sure that employees get paid what they're owed? 
  • How do you make sure you aren't making costly tax mistakes?

You can use pay stubs to help solve these problems. There's no need to use manual payment systems that take more time.

In this article, we'll look at five reasons your small business needs pay stubs so that you can understand the benefits of using automatic payroll systems.


What Exactly is a Pay Stub?

A pay stub is part of your employee's paycheck and usually includes how much they have earned over the current pay period. It also contains information about net earnings, allowances, and deductions.

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Here are five reasons why your business should use a pay stub generator:

1. Produce More Accurate Payroll Calculations

Without payroll software, it's difficult keeping track of payroll calculations, especially when you expand business operations and hire more people. This includes tax rates, medical deductions, and other types of deductions and allowances. 

Using pay stubs makes it easier for you to deal with these calculations. For example, you can add employee bonuses to their respective pay stub, ensuring that you pay your employees what they deserve.

Missing records and compensation disparities increase risk and only create more frustrations for you and your employees. It also breeds mistrust with your people when they can't access the information they need for tax accounting or applying for loans.

Additionally, how much do you know about tax withholdings or retirement contributions? Even experienced accountants can make mistakes in these areas. You're better off getting these payroll issues completed accurately upfront as opposed to trying to fix costly mistakes at a later date.

A Person Calculating Taxes Using Pay Stubs

2. Ensure Company Compliance with Federal and State Laws 

You're required by law to give employees pay stubs that show proof of deductions for Federal income taxes, Social Security, Medicare, and any other requirements. Providing workers with this information on a pay stub ensures that you are following all of these rules.

If your business falls under a certain tax bracket in your state, then you'll have specific requirements about what to include on employees' pay stubs, which helps you calculate state taxes correctly.

So, you should look up the various state laws regarding pay stubs so that your business operations remain compliant with them.

Also read: How Much Is Social Security tax?

3. Reduce Overall Business Costs

With no extra printing costs for paper payment stubs, your business can save time and money. This includes the actual cost of paper for payment stubs, as well as the price of postage when you need to send them out.

You can also save on purchasing the envelopes required when sending pay stubs in the mail. You can't go wrong when a pay stub creator helps you save revenue while being an eco-friendly option for payments.

Happy Employees Having A Formal Discussion

4. A Payroll System Helps Your Employees Too!

Payroll software is of great importance for small businesses because it allows employers to comply with federal laws regarding payroll deductions. If you use a pay stub, you're able to show your employees how much they earned throughout the year (proof of income/employment) and how much they've paid out in taxes. 

Employees need this information because it allows them to check their earnings against what they expected to receive during any specific pay period. It also helps them determine the accuracy of all tax deductions based on their allowance amount and the type of income they receive each month. 

A pay stub creator allows workers to view their payment stubs online and even email them to save for later or after an accountant asks for the information. 

Some companies even offer mobile apps that allow employees with smartphones and tablets to access this data on the go.

Also read: A Full Guide on How to Calculate Income Tax On A Pay Check

Additional Benefits

  • Workers can easily access all employee payments such as net and gross pay to keep track of earnings.
  • Ensure employees' peace of mind when they see their employer complying with federal and state laws regarding deductions and allowances.
  • Increases satisfaction by helping workers understand how their salary and deductions get calculated.

Woman Counting Cash During Audit

5. Keeps Your Small Business 100% Compliant During Audits

Your business can become a target for IRS audits at any time. 

When your business gets audited, you need to provide copies of payment stubs. This helps prove that you're paying workers correctly and following all federal laws regarding deductions. 

An automatic payroll system makes it easier to locate a specific pay stub during an audit. So, you'll have confidence during the audit process as you quickly look up any information the IRS wants to see.

Getting this all set up now will help your business keep accurate records and avoid any unnecessary, costly fines in the future.


The 'cost' of having a pay stub generator is minimal when compared to the headaches. It can also help a small business owner keep up-to-date accounting records and immediately access pay stub information, saving valuable time.

Remember the many advantages of using automatic payroll systems. These include accurate earning records for workers, pay stubs to show precise payouts, less overall paperwork, lower costs, elimination of human error, and other such advantages. So, your following action should be to invest in pay stubs immediately. 

Frequently Asked Questions

Pay stub requirements vary by state and country. Some jurisdictions require employers to provide pay stubs, while others do not. It's important to research and follow the specific regulations in your location.

Yes, you can create pay stubs manually or using a pay stub template. However, using a payroll system is recommended for efficiency, accuracy, and consistency in managing employee payments.

Pay stubs can be generated automatically through a payroll system, which calculates employee earnings, deductions, and taxes. This automation reduces errors, saves time, and ensures a consistent process for managing employee payments.

Pay stubs provide detailed information about employee earnings and deductions, making it easier for both employers and employees to accurately report income and deductions for tax purposes. Pay stubs also help employers track and remit payroll taxes to the appropriate government agencies.

When choosing a payroll system, consider factors such as cost, ease of use, integration with your existing accounting software, and the specific features your business needs, such as generating pay stubs, handling taxes, and managing employee benefits.

Pay stubs provide a clear record of an employee's earnings and deductions for a specific pay period, which can be referenced in the event of a dispute over pay. A pay stub can help clarify misunderstandings and resolve disputes quickly and fairly.

Pay stubs are documents that provide detailed information about an employee's earnings, deductions, and taxes for a specific pay period. Pay stubs are typically attached to a paycheck or provided electronically.

Electronic pay stubs are more eco-friendly, reduce paper waste, and can be easily accessed by employees online. They also reduce the risk of lost or misplaced pay stubs and can be backed up electronically for safekeeping.

A pay stub typically includes the employee's gross pay, deductions such as taxes and benefits, net pay, pay period dates, and year-to-date totals for earnings and deductions. It may also include information about the employee's hourly wage or salary and their hours worked.

Small businesses need pay stubs to maintain accurate records of employee earnings and deductions, ensure tax compliance, and provide employees with clear information about their pay. Additionally, pay stubs can help resolve payroll disputes and streamline the payroll process.
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5 Reasons Your Small Business Needs Pay Stubs
Samantha Clark

A Warrington College of Business graduate, Samantha handles all client relations with our top-tier partners. Read More

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