How to Make a Pay Stub for an Employee

To make a pay stub for an employee, calculate gross pay for the period, subtract pre-tax deductions, withhold federal income tax, Social Security, Medicare and any state or local taxes, subtract post-tax deductions, and record the resulting net pay along with year-to-date totals. Then deliver the stub on payday on paper or through a secure portal. The math is not hard once you know the order of operations, which is where most mistakes happen.

This guide walks through the process for a US employer step by step, with a fully worked salaried example, the current tax rates and wage limits, and the common errors to avoid. For the layout itself, see our pay stub template.

Before you make pay stubs: set up payroll properly

Pay stubs come at the end of a payroll process, not the start. Before the first payday you need:

• An EIN and state payroll registrations for withholding and unemployment insurance.
• A completed Form W-4 from each employee, plus any state withholding certificate.
• Form I-9 employment eligibility verification.
• A pay schedule (weekly, biweekly, semimonthly or monthly) that complies with state payday laws.
• Each employee's rate, exempt or non-exempt status, and enrolled benefits.

Our guide to hiring your first employee covers these steps, and how to do payroll yourself explains deposits and quarterly filings. Make sure the worker really is an employee; if not, they should invoice you instead. The W-2 vs 1099 guide explains the difference.

How to make pay stubs: step by step

Step 1: Calculate gross pay

For salaried employees, divide annual salary by the number of pay periods: 52 for weekly, 26 for biweekly, 24 for semimonthly, 12 for monthly. For hourly employees, multiply regular hours by the rate and overtime hours (over 40 in a workweek for non-exempt employees under federal law) by 1.5 times the regular rate. Add bonuses, commissions, tips and holiday pay as separate lines. Use approved timesheets as the source for hours.

Step 2: Subtract pre-tax deductions

Pre-tax deductions reduce taxable wages, but not all of them reduce the same taxes:

Deduction	Reduces income tax wages?	Reduces Social Security and Medicare wages?
Section 125 health, dental, vision premiums	Yes	Yes
HSA contributions through a cafeteria plan	Yes	Yes
Traditional 401(k) deferral	Yes	No
Roth 401(k) contribution	No	No
Wage garnishment	No (after-tax)	No

Step 3: Calculate Social Security and Medicare

Withhold 6.2% for Social Security on wages up to the annual wage base, which is $184,500 for 2026 and $192,300 for 2027 according to the SSA announcement covered by the Journal of Accountancy. Withhold 1.45% for Medicare on all wages, plus an extra 0.9% on wages over $200,000 in the calendar year. You pay a matching 6.2% and 1.45% as the employer, which does not appear as a deduction on the stub.

Step 4: Calculate federal income tax withholding

Use the employee's W-4 with the wage bracket or percentage method tables in IRS Publication 15-T for your pay frequency. Start from income tax wages after pre-tax deductions. Supplemental wages such as bonuses can use the flat 22% method; see our article on the bonus tax rate.

Step 5: Calculate state and local taxes

Apply your state's withholding tables and any local income taxes. Some states also have employee-paid disability or paid family leave contributions that must be withheld.

Step 6: Subtract post-tax deductions

Take Roth contributions, garnishments, union dues and similar items from the remaining pay.

Step 7: Record net pay and year-to-date totals

Net pay equals gross pay minus all taxes and deductions. Update the year-to-date column for every line. The YTD totals at year end become the employee's Form W-2 figures, so they must be accurate.

Step 8: Deliver the stub and keep records

Give the stub on payday, on paper or electronically if your state allows. Keep the stub, calculations and timesheets with your payroll records.

Worked example: salaried employee paid semimonthly

An illustrative employee earns $58,500 a year, paid semimonthly (24 periods). They pay $120 per period for health insurance through a Section 125 plan and contribute $100 per period to a Roth 401(k). The federal and state income tax figures below are examples for this illustration.

Line	Amount
Gross salary ($58,500 / 24)	$2,437.50
Health insurance (Section 125, pre-tax)	-$120.00
Wages for FICA and income tax	$2,317.50
Social Security (6.2% x $2,317.50)	-$143.69
Medicare (1.45% x $2,317.50)	-$33.60
Federal income tax (example)	-$190.00
State income tax (example)	-$85.00
Roth 401(k) (after-tax)	-$100.00
Net pay	$1,765.21

If the health premium had been taken after tax by mistake, Social Security and Medicare would have been calculated on $2,437.50 instead, overwithholding about $9 a period from the employee and overcharging you the same in matching tax. Small errors like this add up across a year and require corrected filings to fix.

By the end of the year, the YTD gross for this employee would be $58,500, the YTD health deduction $2,880 and the Social Security wages $55,620, which is what box 3 of the W-2 should show.

Worked example: hourly employee with overtime and a bonus

An illustrative weekly-paid employee earns $20 an hour, works 45 hours and receives a separately identified $500 performance bonus in the same check.

Line	Amount
Regular pay (40 x $20)	$800.00
Overtime pay (5 x $30)	$150.00
Bonus	$500.00
Gross pay	$1,450.00
Federal income tax on regular and overtime wages (example)	-$62.00
Federal income tax on bonus (22% flat)	-$110.00
Social Security (6.2% x $1,450)	-$89.90
Medicare (1.45% x $1,450)	-$21.03
State income tax (example)	-$50.00
Net pay	$1,117.07

The bonus shows on its own line with its own withholding, which helps the employee understand why this check is taxed differently. If a non-discretionary bonus, such as one promised for hitting a target, is earned over several weeks, federal law can require you to recalculate overtime for those weeks to include the bonus in the regular rate. Discretionary bonuses, decided at your sole discretion, generally do not.

Choosing a pay frequency

Your pay schedule changes every calculation on the stub. Biweekly pay (26 checks a year) is easy for hourly staff because each period covers exactly two workweeks, which keeps overtime simple. Semimonthly pay (24 checks, usually on the 15th and last day of the month) lines up with monthly bills and benefit premiums but splits workweeks across periods, which complicates overtime for hourly employees. Weekly pay is common in construction and hospitality, and monthly pay is restricted or prohibited for many workers by state law. Check your state's minimum pay frequency before choosing, and keep the schedule consistent once employees rely on it. If you change it, give written notice and plan the transition period carefully so no one has an unexpectedly long gap between checks.

How to correct a pay stub error

1. Find the cause: wrong hours, rate, deduction order, tax table or benefit election.
2. Tell the employee promptly and explain the fix in writing.
3. Underpayments: pay the shortfall quickly, often in an off-cycle payment, since many states set strict deadlines for wages owed.
4. Overpayments: check state rules before deducting from future pay; some states require written consent or limit how much you can recover each period.
5. Issue a corrected stub or show the adjustment clearly on the next one, labeled as a correction.
6. Fix the tax side: adjust the current quarter or file corrected returns if the error crossed quarters, and correct any W-2 already issued with Form W-2c.

Tools for making pay stubs

Option	Best for	Trade-offs
Spreadsheet plus template	One or two employees with simple pay	Manual updates to tax tables; easy to make errors
Full-service payroll software	Most small businesses	Monthly fee, but calculates, deposits and files taxes
Accountant or bookkeeper	Owners who want hands-off payroll	Higher cost; you still approve hours and changes
Online "pay stub generators"	Rarely appropriate	Produce a document but do not run payroll, deposit taxes or file returns

A pay stub only reflects payroll you actually ran. Creating stubs that do not match real wages and tax deposits, for example to support a loan application, is fraud. Use stubs as a record of real payroll, never as a substitute for it.

Common mistakes when making pay stubs

• Using last year's tables or wage base. Update every January.
• Missing overtime for non-exempt employees, including salaried non-exempt staff.
• Wrong order of deductions, as in the example above.
• Ignoring state pay frequency and wage statement laws. Some states mandate specific stub contents and paydays.
• Not reconciling quarterly. YTD totals should tie to your Form 941 filings and tax deposits. Our guide to employer payroll taxes explains the deposits.
• Forgetting minimum wage increases. Many states raise their minimum wage every January 1.

Pay stubs for owners and contractors

If you own an S corporation and work in it, you should be on payroll with a reasonable salary and receive stubs like any employee. Sole proprietors cannot pay themselves wages; they take draws. Contractors are paid against invoices, with no withholding, and get a Form 1099-NEC if payments reach $2,000 for 2026.

This is general information, not tax or legal advice. Payroll rules vary by state, so confirm details with a payroll provider, accountant or your state agencies.

Payroll covers your employees; invoices cover your customers. For the billing side of your business, use our free invoice generator to create professional invoices with no sign-up and download them as PDFs.