Why Do I Need a Pay Stub? Here’s What You Need to Know

If you are an employer who has been asked to provide your employee with a pay stub, perhaps because they need one during some type of application process, you may be wondering why they need pay stubs and what they are used for. To understand why they’re necessary, it’s important to first understand what exactly pay stubs are.

Here’s a beginner’s guide to pay stubs, what they’re for, and why they’re necessary.

What are pay stubs?

A pay stub can sometimes be referred to as a paycheque stub or a cheque stub. They used to be attached to a paycheque, back when people got paid with a paper cheque that they then took to their bank; hence the term “stub”. These days, they are in a separate document. It is a statement of wages earned over a specific period.

It documents all of the necessary details about an employee’s pay. It breaks down their payment information for the current period that’s being paid out on that specific cheque as well as their payment information for the entire year up until that point (this is referred to as year-to-date or YTD).

Beyond just the money that they’re taking home, it also outlines things like taxes and other deductions to provide a holistic understanding of the overall earnings and the amount the employee will actually receive (i.e., the net pay).

What information is included?

There are a number of figures included on a pay stub that help both an employer and an employee keep track of their detailed financial information from pay period to pay period. Pay stubs typically include the following information:

• Employee & employer names and addresses

• Gross wages

• Pay period dates

• Pay date

• Pay rate

• Hours worked (if applicable)

• Overtime pay

• Vacation pay

• Deductions (tax, EI, Canada Pension Plan, benefits, etc)

What are they used for?

Pay stubs are used for the benefit of both employees and employers. Employees can use their pay stubs to review and ensure they are paid correctly while gaining an understanding of what was deducted from their gross pay and why. Employers can use pay stubs for record keeping as well as to settle any discrepancies with employees.

It’s basically a proof of payment that can be used for reference by either the employee and employer whenever needed. They also come in handy during tax time should your employee require any extra documentation beyond the T4.

Why does my employee need one?

Whether you pay your staff electronically or in paper-form, you likely provide your employees pay stubs along with their payment. If not, they can request one at any time. In Canada, employers are legally required to provide employees with pay stubs.

They aren’t only an official record of your employee’s earnings, but also of their employment. These documents confirm that they are being paid what they are owed and that the right amount of taxes and deductions are being withdrawn, as well.

This legal proof of income and employment isn’t only for the sake of record keeping and reviewing. Pay stubs may be requested if your employee is applying for a loan, mortgage, credit, EI, car, or anything where they would need to prove their income and employment in order to get approved.

Generally, it’s a good idea for employees to collect pay stubs and keep a record of them all the time so they don’t need to request backdated pay stubs when they’re in a pinch.

At OneTwoPay, we offer quick and easy pay stub generation with the ability to backdate up to three years.