05 Sep 4 Ways To Help Employees Understand Their Paychecks
In the National Payroll Week 2020 survey, 59.99% of respondents say they are “very certain” their payroll withholding and take-home pay are correct each payday. This leaves 40.1% who are not very certain — and that’s a problem, because you want your employees to be “very certain” that their paychecks are correct.
Assuming you are paying your employees correctly, here are four tips to boost employee paycheck understanding.
1. Encourage employees to actually read their pay stubs.
On payday, employees tend to be more concerned with their take-home amounts than with what’s on their pay stubs. Some may not even read the pay stub at all.
Instead, they’ll check their bank account (or the paper check), and if the take-home amount is less than what they expected, they’ll automatically assume it’s a payroll error. They would have seen that it’s not, had they read their pay stub.
So be sure to emphasize the importance of employees reading their pay stubs.
If you offer a self-service platform, make sure your employees know how to access their pay stubs through the online system.
2. Create easy-to-read pay stubs.
There’s more to payroll than meets the eye, and the average employee isn’t trained to delve below the surface. It’s therefore crucial that you lay out pay stub information in a straightforward way that captures how you arrived at the net pay.
For example, you should list:
- Starting and ending pay period dates.
- Pay date.
- Gross wages. Identify what’s in the gross wages, line by line — such as straight-time pay, overtime pay and bonus.
- Deductions. Break these down by federal and applicable state/local taxes, pretax deductions, and post-tax deductions.
- Net/take-home pay.
Abbreviations should be easily recognizable, such as “Med Tax” for Medicare tax and “SS Tax” for Social Security tax.
3. Recommend free online calculators.
Employees can use the calculators to determine whether they were accurately paid or to estimate their net pay for upcoming paydays.
There’s also the IRS Tax Withholding Estimator, which helps employees fill out their Form W-4 to ensure accurate federal income tax withholding.
4. Make “paycheck education” a financial wellness goal.
You can incorporate “paycheck education” in your formal financial wellness program. If you do not have a formal program, you may educate employees in other ways.
- Hold a “paycheck education” session, led by a payroll expert. The session may cover paycheck fundamentals, along with more nuanced topics — such as pretax voluntary deductions, post-tax deductions (e.g., wage garnishments), and how paychecks impact annual Form W-2.
- Let employees know that you take paycheck concerns seriously, and develop a responsive system for handling routine inquiries.
- Provide as many free resources as possible, including the National Payroll Week’s Paycheck Tools, which are designed to help employees understand their paychecks.
Let us know how we can help you communicate with your employees.
Original content by © IndustryNewsletters. All Rights Reserved. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.