Worker payment records provide important information on worker earnings per pay period, employee withholdings, employer contributions, and employee net pay.
"Worker payment records" may also be commonly referred to by several other names such as "payslip", "paystub", or "paycheck".
Fun Fact
Providing payment records to workers is actually not required by federal law, but is mandated by many states.
Gross wages
Gross wages are the total worker earnings before any taxes, benefits or other payroll deductions are withheld from their wages.
Deductions
Pre-tax deductions
A pre-tax deduction is money subtracted from an employee's gross wages before taxes are withheld from their paycheck, thus reducing the overall tax burden on the employee.
Common pre-tax deductions include:
- 401(k)
- Medical benefits
- Group term life insurance
Post-tax deductions
A post-tax deduction is money subtracted from an employee's gross wages after taxes are withheld from their paycheck. A post-tax deduction does not reduce the tax burden on the employee.
Common post-tax deductions include:
- Roth IRA
- Union dues
- Wage garnishments
Employer contributions
Employer contributions are any financial contributions to an employer sponsored plan, such as health insurance or 401(k), made by the employer. Employer contributions do not impact overall gross wages.
Reimbursements
Reimbursements allow employer to repay employees for out of pocket expenses, and are often included on payroll. Reimbursements are non-taxable.
Tax withholdings
Both employees and employers are required to pay taxes on earnings. Both the IRS and tax agencies require specific tax withholdings, including unemployment and income tax. See below for specific tax types by employee and employer.
Employee taxes
- Federal income tax
- Social security
- Medicare
- State income tax (when applicable)
- And more (when applicable)
Employer taxes
- Social security
- Medicare
- Federal Unemployment
- State Unemployment
- And more (when applicable)
Net pay
Net wages are the employee take home pay, after all taxes and deductions have been taken out.
Net Pay
Gross wages - Employee taxes - Employee deductions
Total payroll cost
Every payroll processed has some sort of payroll cost associated with it, which is an employer cost.
Total employer cost
Gross wages + Employer taxes + Employer contributions + Reimbursements