Taking care of your employees is your best ticket to success within your small business. And there’s a lot that goes into that.
But arguably one of the most important decisions you’ll make with regards to your employees is how you’re going to handle payroll.
More than 93 percent of employee’s wages are received through direct deposit. The remaining employees receive a paper check (3.62%), a payroll card (.99%), or are paid by other methods (2.13%).
While many small businesses still choose to use paper checks for their payroll, the cost of issuing a check — $2.01 to $4.00 per check — makes this an expensive payroll option.
But do you have to use paper checks? What are your recordkeeping requirements? And most importantly, what pay stub laws do you need to know about in your state?
In this article, we’ll cover the basics of state-by-state pay stub requirements.
What is a Pay Stub?
Pay stubs are documents that provide employees with a detailed breakdown of their earnings and deductions. They serve as accurate records of total hours worked and total wages earned, helping employees keep track of their income. Pay stubs are also essential for employers to comply with various labor laws and regulations.
A pay stub includes key information such as gross earnings, also known as gross wages or gross pay, which represent the total amount an employee earns before withholdings and deductions.
It also shows the number of hours worked during a specific pay period and the hourly rate. Deductions, which are subtracted from the gross earnings, can include federal and state income taxes, Social Security and Medicare taxes, healthcare and retirement contributions, and any other voluntary deductions authorized by the employee.
Taxes withheld, including federal income tax and state income tax (if applicable), are listed on the pay stub, along with any other mandatory deductions such as unemployment insurance or workers’ compensation. The net income, the amount left after deducting taxes and other deductions, is the final figure displayed on the pay stub, representing the employee’s take-home pay.
In conclusion, pay stubs play a crucial role in providing employees with a comprehensive breakdown of their earnings and deductions. They serve as proof of income and ensure compliance with labor laws. It is important for employers to accurately generate pay stubs that reflect an employee’s wages, deductions, and net income.
Do I Have to Provide a Pay Stub?
Besides paychecks, small businesses need to know the requirements for pay stubs. According to the Fair Labor Standards Act (FLSA), employers are not required to provide employees with pay stubs. However, the FLSA does require that employers keep accurate payroll records, including of the number of hours worked and employee wages, as well as employee information such as name and social security number, address, and hourly rate of pay.
State law gets more complicated. Each state has its own pay stub requirements that employers must follow. Employers that have staff in more than one state must follow the requirements of the state where each employee resides and works. Employees that work in multiple states might be subject to further regulations, depending on which states are involved.
No matter what your situation, ensure you’re complying with state regulations before choosing how to go about paying your employees. According to IRIS FMP, these are the requirements by each state for the delivery of employee pay information.
All states fall into one of these categories for pay stub requirements:
- No requirement states
- Access states
- Access/print states
No Requirement States
The following states do not require employers to provide a statement that details an employee’s pay information, though it’s a good practice to issue employee’s pay stubs regularly and aligned with your pay period. Because there’s no required format, an employer may deliver a pay statement electronically if the employer elects to provide pay stubs to employees.
- South Dakota
In states without a pay stub requirement, it’s up to the employer to decide what information to provide on the statement.
The following states require employers to furnish or provide a statement with details of an employee’s pay information. There’s no requirement for the pay statement to be in writing or issued as paper pay stubs. A reasonable interpretation of this law suggests that an employer can comply with the pay stub requirements in these states by furnishing an electronic pay stub. Employees must be able to access the electronic pay stubs.
Note: While most states have adopted this interpretation, some state agencies may require additional features like the capability to print electronic statements.
- New Hampshire
- New Jersey
- New York
- North Dakota
- Rhode Island
- South Carolina
- West Virginia
These states require employers to provide a written or printed pay statement that details the employee’s pay information. The pay statements are not required to be delivered with the check or in another medium.
A reasonable interpretation of the law says an employer in these states can furnish an electronic paycheck stub that employees can print, thereby complying with the pay stub requirements. Furthermore, employers must ensure their employees have access to electronic pay stubs and the capability of printing electronic statements.
Note: Most state agencies have adopted this interpretation. However, some state agencies may vary. Those agencies have offered an interpretation that might include additional requirements — such as an employee’s consent to receive the pay stub electronically. These states include:
- New Mexico
- North Carolina
Some states require employers to provide employees with the ability to opt out of any paperless pay program it offers. This generally applies to cases where the employer rolls out a system to furnish electronic pay stubs. The following states are opt-out states, meaning, an employee that opts out of electronic delivery would begin receiving their paper paycheck stub once again.
Currently, Hawaii is the only opt-in state that requires employee consent before an employer implements an electronic paperless pay system. Employers in Hawaii must provide a written or printed pay statement with details of the employee’s pay information unless the employee agrees to receive their pay statement electronically.
Check with each state’s taxing authority to make sure you follow their rules and follow up each year to ensure you have the latest requirements. You can find a list of every state’s online tax agency at the Federation of Tax Administrators.
Get in Touch
While there’s no federal law that requires pay stubs, there are state laws you must follow and ensure you meet all of the pay stub requirements. Failure to comply with your state regulations can add up to stiff fines — and that’s an expense your small business doesn’t need. Fortunately, PrimePay is here to help make payday a breeze.
With PrimePay’s payroll software and payroll service solutions, you can easily adhere to state payroll requirements. PrimePay helps you run payroll accurately and on time, and it ensures compliance with all payroll-, human resources-, and tax-related laws and regulations.
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