What is a payslip?

A payslip, or pay slip, is a crucial document that details an employee’s earnings for a specific pay period.

Payroll can issue slips digitally or on paper. Either way, they should include detailed information about an employee’s gross salary, tax deductions, and net pay after all deductions are made. A payslip might also detail an employee’s tax information, paid leave balances, and employee contributions to benefits like health insurance or retirement funds. 

Payslips are vital internal records that support transparency and accuracy in the payment process. They help employees and employers verify pay, identify discrepancies, and address issues with payroll. Likewise, they’re valuable proof of income and employment, which workers might need to apply for visas, secure housing, or take out a bank loan. 

Payslips vs. pay stubs

You’ve probably heard “payslip” and “pay stub” used interchangeably. Both terms refer to similar documentation. A pay stub is a more common term in United States payroll offices and refers to the bottom section of a paycheck. In the U.S., a pay stub generally details the same information as a separate payslip. Many payroll managers prefer this method, as it’s easier to issue and organize alongside a paycheck.

Payslips vs. paychecks

Payslips and paychecks serve two different purposes. A paycheck is transactional, whereas a payslip is informative. A paycheck serves as salary payment for a specific pay period and can be remitted as a direct deposit or physical check. It only states the employee’s pay. Conversely, a payslip lists an employee’s gross salary, taxes, contributions, deductions, and net salary. 

What information is listed on a payslip?

Payslips may vary from one organization to the next, depending on company policy and local employment laws. A payslip typically includes the following details: 

• Employee information: The worker’s full name, address, employee ID number, and tax code.
• Employer information: The company name, address, and contact details.
• Bank details: Information about the bank account where paychecks are deposited, such as an account number and bank name. Although this information can verify that bank information is up-to-date, some organizations exclude it for privacy reasons.
• Pay period: The start and end dates of the pay period for the relevant payment. 
• Gross earnings: The gross pay before deductions, including base salary, bonuses, overtime, back pay, retroactive pay, and additional payments. 
• Deductions: An itemized list of deductions, such as tax deductions, employee contributions to retirement plans and provident funds, health insurance premiums, pensions, and other withholdings. 
• Net pay: The amount of money an employee takes home after subtracting all deductions from their gross pay.
• Leave balances: Information on accrued leave or paid time off, including vacation days and sick leave. 
• Year-to-date (YTD) earnings: Cumulative earnings from the beginning of the year up to the current pay period, including gross pay and deductions, to give employees an overview of payments for the year so far. 
• House rent allowance (HRA): Some salary packages include a house rent allowance to cover housing expenses. Depending on local laws, house rent allowances can be partially or fully exempt from income tax. 
• Cost to company (CTC): The total amount an employer spends on an employee annually, including salary, bonuses, benefits, and allowances. CTC is typically detailed in a separate document but can also be summarized on a regular payslip. 

What is a payslip used for?

Payslips are much more than records of employee earnings. They’re necessary documents that ensure clarity and compliance in the workplace. Here are four reasons payslips matter so much: 

1. Ensure transparency of employee salary

The best payroll systems craft payslips for maximum clarity, providing a clear breakdown of monthly earnings and deductions. They detail how gross pay is calculated, including any bonuses or overtime, and itemize deductions (e.g., taxes, social security, retirement contributions) that are subtracted to calculate net pay. 

Transparency is a win-win for employers and employees. Workers get a straightforward understanding of their monthly salary, ensuring that they’re fairly compensated in accordance with their employment contract. For employers, a well-designed payslip demonstrates compliance with agreed-upon pay structures and reinforces trust in the employee-employer relationship. 

2. Meet legal and regulatory requirements

In many countries, payslips are more than just a wise record-keeping practice. Employers are legally required to provide a payslip in an easily accessible format alongside payment. Depending on local employment laws, failing to provide payslips can result in serious financial consequences, including penalties, fines, or lawsuits.

Additionally, employees can pursue legal action over wage and hour disputes, misclassification of employment status, breach of contract, unfair labor practices, or tax-related issues if employees file taxes incorrectly due to improper documentation.

3. Streamline payroll and tax reporting

Tax season doesn’t have to be complicated. Clear records of earnings and deductions streamline payroll tasks and tax document preparation, especially when managing payroll internationally.

For employees, a detailed payslip helps track earnings and deductions throughout the year, ensuring tax returns are accurate. For employers, payslips facilitate precise payroll processing, ensuring compliance with tax regulations and simple payroll reporting. Additionally, payslips come in handy during audits or payroll compliance issues, mitigating the risk of unnecessary penalties.

4. Provide proof of income and employment

When you apply for a loan, rent a property, or apply for a visa, you might be asked to demonstrate proof of income. A payslip is easy to read and verify, making it the most powerful tool for proving income and employment. Employers who issue accurate payslips support their workforce’s personal and financial activities, bolstering trust and positive employee-employer relationships. 

How to create and manage electronic payslips

Payroll should be a simple administrative task at the end of each pay period. With a few thoughtful best practices, tracking employee salaries can be a cinch. 

1. Select the right payroll software or outsource payroll: You can choose between in-house payroll software or a payroll outsourcing service. A payroll department provides more control over your data and filing systems but also requires a dedicated IT manager to oversee regular maintenance. Outsourcing payroll presents risks related to data sharing, but it can save money and provide up-to-date services. 
2. Integrate with HR systems: The more interconnected your software, the easier it is to automate salary payments, reduce manual entry errors, and protect organizational knowledge. Integration simplifies the entire process so you can quickly and efficiently generate and distribute payslips. 
3. Maintain accuracy and compliance: Accurate, current information is necessary for proper documentation and tax filings. Regularly update payroll data and employee information. The payroll department should schedule regular internal audits to double-check crucial information, including deductions, CTC, and contributions. 
4. Secure access protocols: Some payslips contain sensitive employee information, including ID numbers, tax codes, and a home address. Payroll software or third-party payroll outsourcing services should use encryption and secure access controls, and perform regular security audits to protect you from unauthorized access or security breaches. 
5. Provide employee access: Emails and physical payslips are difficult to organize. A secure employee portal or mobile app gives your workers easy access to payslips. 
6. Keep audit trails: Local requirements dictate how long you must keep payroll records. Audit trails provide a comprehensive record of every action and transaction related to your payslips, strengthening your ability to verify each activity, change, and payment entry. 

Accessing payslips in Oyster

With Oyster, you and your distributed team members can easily access payslips and detailed information about gross and net salary, deductions, CTC, and more. Simply log into your account, select “Contracts,” and click on the “Payslips” tab. Find out more about payslips in Oyster.

Oyster is the ideal partner for payroll outsourcing 

Want your payroll to be really easy? Partner up with Oyster for fast and compliant payroll processing, meticulous payroll audits, and comprehensive record-keeping. You focus on growth. We’ll make sure it’s all safely recorded.