It is often difficult for employers to know what type of pay stub obligations are being charged to them, as there are different federal laws for different states.
Knowing your requirements according to your state will help your business adhere to the Department of Labor requirements and avoid costly penalties.
In this guide, you will understand everything you need to know about pay stubs, why employers should provide you with pay stubs, creating a pay stub, and the strong consequences of non-compliance. So, without any further ado, let’s begin!
Understanding Pay Stubs:
A pay stub is a document the employer provides to an employee and a physical paycheck. A pay stub outlines the details of an employee’s earnings and deductions for a certain pay period, generally on a bi-weekly or monthly basis. Pay stubs are a record of the financial transactions related to employee compensation.
The first step in generating a pay stub is to have every employee complete the W-4 form. Once this step is completed, the employers would need to provide the following details:
- Employee’s number of hours worked in the pay period circle
- Total wages paid before employee’s deductions
- State, Federal, and Local taxes, which are hidden from employee’s gross earnings
- Employee share of insurance premium
- Net Pay
Pay stubs are extremely important because they can be used as proof of income when employees apply for a loan or purchase a house. Employers need to make sure that the details on the pay stub match the details on every employee’s W-2 form, which is used to file personal tax returns.
Are Employers Required to Provide Pay Stubs?
As no federal law requires employers to provide pay stubs to their employees, so there is no requirement to provide pay stubs to employees, but employers should always keep in mind the Fair Labour Standards Act.
This federal law establishes minimum wages, overtime pay, recordkeeping, and child labor standards, which affect full-time and part-time workers in the private sector and federal, state, and local governments.
Though paystubs are not required under the federal law, the Fair Labor Standard Act states the employers must keep employees’ time and pay records.
Requirements by State:
Every state has different requirements, which means that the employer needs to be enlightened by the rules and regulations.
There are three different types of states:
- Access States
- Access Print
- No Requirement State
Let’s break down these components in order to understand them better:
Access States
These states require the employers to provide their employees with access to pay stubs that include all of their payment details.
It’s not specified that a pay stub should be a physical one so the employers can provide pay stub electronically.
States are the following:
- Alaska
- Arizona
- Idaho
- Illinois
- Indiana
- Kansas
- Kentucky
- Maryland
- Michigan
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New York
- North Dakota
- Oklahoma
- Pennsylvania
- Rhode Island
- South Carolina
- Utah
- Virginia
- West Virginia
- Wisconsin
- Wyoming
Access Print
In states that fall under this category, employers must provide a physical copy of a pay stub, which outlines the employee’s payment information.
States are the following:
- California
- Colorado
- Connecticut
- Iowa
- Maine
- Massachusetts
- New Mexico
- North Carolina
- Texas
- Vermont
- Washington
No Requirement State
These states do not require employers to provide employee pay stubs.
States are the following:
- Alabama
- Arkansas
- Florida
- Georgia
- Louisiana
- Mississippi
- Ohio
- South Dakota
- Tennessee
Employers also need to resolve whether they are in an opt-out or opt-in state.
- Opt-Out States: Employers must first get the employee’s compliance before changing the way it delivers pay stubs. Within the opt-out states, the employer can allow the original pay stub delivery method if the employees do not agree to change.
- Opt-In States: Employers are required to provide a physical paycheck stub. The physical is not required if the employee chooses to take an electronic pay stub. Recently, only Hawaii is the active state that requires employees’ consent before the employer implements paperless payment system.
What are the Consequences of Pay Stub Non-Compliance?
Penalty for not providing employees with a pay stub may vary according to the state and depend upon the laws of the state.
For example, employers in California shall be fined $50 for an initial pay stub violation and $100 per employee for each violation in a pay period.
Do Businesses Have to Furnish Pay Stubs under Federal Law?
The Fair Labor Standards Act (FLSA) regulates minimal wages, overtime, child labor, and recordkeeping rules for private-sector firms and is the main federal legalization in dispute here.
The FLSA does require businesses to maintain authentic records of the hours worked and pay given to employees, according to the U.S. Department of Labor.
Cost of Non-Compliance: Local law determines the consequences and costs of non-compliance. In any scenario, an employer should let their employees review and check their paystub even if they are not required to do that.
What deductions can Employers Make on Pay Stub?
Employers can withhold a particular percentage of your paycheck stubs from your paycheck for payroll taxes and other things governed by the Federal Insurance Contributions Act (FICA), like Federal Income Tax and Social Security Contributions. You may also see the deductions made on the pay stub, which you have legally authorized for.
A legally authorized deduction can comprise food, lodging, transportation, child support, and alimony. So, voluntary deductions come in the form of charitable contributions. Spontaneous authorized deductions are permitted even if your pay drops below minimum wage.
What are the Consequences of Breaking Pay Stub Requirements?
Employers who fail to adhere to the pay stub regulations might face penalties from their state. For example, there is wrongdoing in California to refuse to disclose pay stubs. There is a $50 civil fine for the employee’s first infringement. The fine goes up to $100 for each offense, with a cap of $4,000 possible per employee.
Conclusion:
However, there is no federal law which requires pay stubs. There are state laws that must be followed to ensure that you meet all your requirements. Failure to meet the requirements, with compliance with your state laws, can add up to heavy fines, and that’s an expense your business doesn’t need.
