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How do you respond employee's question about pay stub? Well that's tricky isn't it? This guide offers tips on some quick ways to do that and avoid problems that arise from pay disputes.
If you ask any HR manager about their most dreadful task, they will probably mention payroll management. The reason for this is simple. Salary is arguably the most important thing to an employee, and they will not hesitate to make a beeline to your office to make complaints when they encounter something they do not understand on their pay stubs.
In worst-case scenarios, they could file a lawsuit if they feel you intentionally intended to defraud them, which can land you in serious trouble. So, as an employer, it is important to always be ready to answer all pay stub questions presented to you by your employees in a manner that will leave them feeling satisfied.
This guide offers tips on some quick ways to do that and avoid problems that arise from pay disputes.
1. Have a Clear, Plain English Explanation of What Different Items of the Pay Stub Mean
Most employees may not care much about the pay stub's contents, but some will go through every detail with a fine comb, asking questions along the way. So, the best place to start is ensuring your employees understand a pay stub in detail, including what every part entails.
Some parts may be straightforward, such as:
- Hourly rate: the hourly rate is the pay an employee receives for each hour of work. It is typically expressed in dollars and cents per hour and can vary based on the employee's class and state.
- Hours worked and overtime: this section indicates the hours worked during the pay period, including overtime.
- Gross pay/net pay: gross pay is the entire employee's earnings before deductions, while net pay is what they take home after the deductions and benefits.
The paystub is generally not a large document, and thus many employers tend to use abbreviations to save space. Unfortunately, abbreviations can be confusing to your employee, and you may need to clarify what they mean.
Also, abbreviations used on a pay stub can vary based on the employer, state, and payroll system. But there are some standard abbreviations that you may find on almost any pay stub, such as:
All pay stubs will have a YTD abbreviation. Most employees may wonder what YTD means on a pay stub, thus seeking to get answers from you.
YTD is the acronym for year-to-date. It represents the income earned by an employee until the date of their last pay. For example, if an employee has been working from January to June, their YTD will show their gross pay for all months until June.
There are several types of YTD values you may want to understand.
- Year-to-Date Gross Pay
This YTD value indicates the gross pay earned over the months before tax deductions. This means Year-to-Date Gross Pay may be higher than what the employee takes home, so you must make that clear to them.
- Year-to-Date Net Pay
This YTD value indicates what the employee gets in the bank after statutory deductions.
- Year-to-Date Earnings
This YTD value indicates the employee's total income and can include overtime and any additional income above their base salary. It may also contain information on Social Security, Medicare, and income tax payments.
- Year-to-Date (YTD) Returns
This YTD value may not appear on a pay stub as it relates more to profits or losses made by the employee on their investments.
FICA (Federal Insurance Contributions Act) is the federal law that gives the employer the right to withhold certain taxes on behalf of the federal government. There will be two FICA deductions on an employee's pay stub; one for social security and the other for Medicare.
The social security tax is applied at a rate of 6.2% of an employee's gross pay, capped at a maximum amount that changes per year, while Medicare is applied at a rate of 1.45% of the gross pay.
FICA taxes go towards funding social insurance programs that provide benefits for retirees, the disabled, and other social services.
The Federal Unemployment Tax Act (FUTA) is a federal law requiring employers to withhold unemployment tax used to fund the unemployed benefit programs. FUTA is applied at a rate of 6 percent on the first $7,000 earned by an employee in a calendar year.
However, an employee can enjoy credits of up to 5.4 percent on the tax after fulfilling their state's unemployment benefit tax requirements bringing the tax down to 0.6 percent.
There are exemptions for certain types of employees, which may be confusing to some employees, so you will want to ensure that you clarify everything to each employee based on their class. The main difference between FICA and FUTA is that FICA caters primarily to unemployment benefits while FICA caters to social services and Medicare.
PTO is paid time off and refers to the time taken off from work while the employee still receives regular pay. PTO can include sick leave, vacation time, and any time off granted by the employer.
In most cases, PTO appears on the paystub as a separate line item, along with the number of days and hours taken and the pay earned during the time off.
If you offer 401(k) plans for your employees, some may choose to contribute to their 401(k) plans. If this is the case, you will need to withhold their contribution pre-tax and indicate this on the pay stub.
It is important to make employees aware that the deductions will appear on their pay stubs if they choose to contribute to their 401(k).
2. Create an Employee Payroll Portal
If you are a small-scale employer, you can handle paystub questions as they come. But handling questions as they come can be a challenge for an organization with many employees.
Under such circumstances, it is best to create an employee portal where your employees can access all the information they need about their pay without having to come to you directly.
You can also include a knowledge base where employees can access answers to some of the most common paystub questions they may have. An employee portal also allows employees to download pay stubs if they lose the original and provides a breakdown of all payment information, which can help correct discrepancies.
3. Include Paystubs Education as Part of the Onboarding Process
Some employees may have a basic understanding of their pay stubs when they join your organization, while others may not. By including paystubs education as part of the onboarding process, you can get all employees on the same page about pay stubs from the start, improve their understanding, and ultimately reduce the number of questions that may arise later.
4. Customize Your Paystubs
Pay Stubs are customizable to meet any need. For example, if you notice that most questions are about a specific section of the pay stub, you can make changes to that section to make it more understandable to your employees.
Most paystub generators on the market allow for customization, so you only need to make the change once, and it will reflect on all paystubs you create after the changes.
5. Offer Payroll Training to Employees
Including paystub education as part of the onboarding process is a great way of bringing every employee up to speed about all there is to understand about their enumeration. If you had not offered the same kind of training to your existing employees, you could consider offering on-the-job training on the same.
You do not have to offer payroll training as a stand-alone course. You can include it as an add-on when offering other training courses. Alternatively, you can have a member of your HR team offer training in bits during your office meetings.
There are several things you may want to consider when designing your training courses. For example, you may want to consider the most prevalent questions asked by your employees, their level of understanding, and the efficacy of the training in other organizations.
6. Leave the Door for Questions Open
Employees will respond to training differently. So, whether you offer paystub education during the onboarding process, there will always be that employee that doesn't understand everything and will want to ask questions.
At other times, the employee that understood everything may notice discrepancies on their paystubs. Either way, the employees will need to know that their concerns will get an audience.
The best approach to addressing such concerns would be to let your employees know that your payroll office is always open for questions and clarifications about anything. Also, you may also consider training your finance office employees on how to handle payroll queries to minimize the chances of conflicts.
As an employer, you should always be ready to answer all employee questions concerning pay stubs. The best bit about this is that it helps employees understand their pay structure and benefits, leading to open communication with their employer and improved productivity.
On the other hand, ignoring paystub questions will have the opposite effect. Answering questions may not be easy, but the tips highlighted in this post can help make it easier for you.
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