There’s lots of data to keep track of for all your employees. But virtually none is more important than up-to-date payroll information.
You need to have a record of how many hours your employees have worked, their gross salary, tax withholdings, and all other deductions. Not only will this make it easier for you to pay your taxes and do payroll reconciliation, but it also allows employees to better understand their finances.
You track this information for each member of your team in an employee earnings record. This article will explain to you what an employee earnings record is, what information it needs to contain, and how you’ll use it.
What’s in the employee earnings record?
An employee earnings record is a report that details how much your employees are paid during the year. It’s similar to your payroll register, but lists information for a single employee rather than for your whole team The report is generally broken down by pay period and will include the following details:
- Personal information: The earnings record will include personal information like an employee’s name, address, marital status, and social security number. It may also include their employment dates.
- Gross and net pay: There are two totals you want to pay attention to on an employee earnings record — the gross and net pay. Both totals are calculated for hourly and salaried employees. Gross pay refers to the total amount an employee has earned during a pay period before any deductions are taken out. The net pay is calculated after subtracting the withholdings and deductions from the employee’s gross pay.
- Federal, state, or local tax withholdings: Any federal, state or local tax withholdings are calculated based on the total gross pay. FICA taxes, which include Social Security and Medicare, are also calculated based on gross pay.
- Voluntary deductions: Employees may have a number of voluntary deductions that are taken out of every paycheck. This includes health insurance, 401(k) plans, and other benefit-related deductions.
- Reimbursements: Some employees may receive reimbursements for things like travel, meals, or a company car. This could also include special payments for paid leave or disability payments.
All together, the employee earnings record represents a snapshot of an employee’s total compensation and deductions for a given pay period.
How to use the employee earnings record
There are several different things you can the employee earnings record to do:
- Calculate net pay: The employee earnings record tells you each employee’s net pay, which is the amount they’ll take home in a given pay period after taxes. The employee earnings record shows how much is deducted from gross pay and for which taxes, so that employees always know how their take-home pay is determined.
- Fill out tax information: The employee earning record is used for a variety of tax purposes. For instance, you can use it to prepare each employee’s W-2 form at the end of the year. This information is also tracked on Form 941, an important quarterly payroll tax form all employers must fill out.
- Track FICA taxes: The employee earnings record lists each employee’s FICA tax deductions, which employers are required to match throughout the year. Employers are required to match their employee’s FICA taxes throughout the year and send both sides’ contributions to the IRS. Social security contributions are another FICA tax recorded throughout the year on an employee earnings record. These withholdings are especially important to track consistently because they end once an employee reaches their maximum contribution for the year.
Keeping an accurate employee earnings record is vital for your business, especially considering all the state and federal tax filing requirements. Without up-to-date records, you’re going to have a hard time providing quarterly details about your employees and payroll. That’s why it’s crucial that your payroll platform or workforce management software of choice makes it easy to access this information.