What Is a Pay Stub? Definition, Instance, and Free Template

Operating a small enterprise comes with many duties, and managing payroll is among the most important duties.

However on the subject of pay stubs, are you assured you’re offering your workers with all of the important info?

Also called payslips, pay statements, or wage statements, pay stubs aren’t only a piece of paper. They’re a report of earnings, deductions, and compliance that may defend your corporation and construct belief together with your group. You’ll be able to generate a pay stub by yourself utilizing templates or ease the method with payroll software program. Staff can obtain their pay stubs electronically by way of direct deposit or within the mail on paper. Sounds tough? Don’t fret. 

On this information, we’ll clarify all the things that you must find out about creating and managing pay stubs and making certain your corporation stays organized and compliant.

Disclaimer: The article is solely for informational functions solely and doesn’t represent authorized or tax recommendation. Pay stub necessities might change, and employers ought to seek the advice of with a certified legal professional, tax advisor, or their state’s Division of Labor to make sure compliance with relevant legal guidelines.

• Transparency and belief: When workers or contractors obtain an in depth pay stub, they’ll clearly see how their earnings are calculated, together with deductions for taxes, advantages, and different withholdings. This transparency helps construct belief and reduces the possibilities of payroll disputes.
• Authorized compliance: Whereas federal regulation doesn’t require employers to offer pay stubs, many states have particular laws that mandate it. By issuing pay stubs, you guarantee compliance with state legal guidelines and keep away from potential penalties.
• File maintaining: Pay stubs function an official report for each you and your workers. They are often important when resolving disputes, getting ready for audits, or verifying employment historical past.
• Worker monetary planning: Pay stubs give workers a transparent breakdown of their earnings, serving to them perceive their funds higher. That is particularly vital for budgeting, making use of for loans, or submitting taxes.
• Professionalism: Persistently offering pay stubs displays nicely on your corporation. It reveals that you just take payroll critically and are dedicated to working an organized and accountable operation.

• Employer and worker particulars: Firm identify and handle, worker identify and handle, worker ID or partial SSN.
• Pay interval particulars: Begin and finish dates of the pay cycle, plus the precise pay date.
• Pay charges and hours labored: Common, additional time, vacation, or double-time hours, with related pay charges
• Gross wages: The whole quantity of wages earned earlier than any deductions.
• Taxes withheld: The pay stub ought to specify the amount of cash deducted from gross wages to pay federal and state taxes, which generally include federal revenue tax, Federal Insurance coverage Contribution Act (FICA) taxes (Medicare and Social Safety), and state and native taxes, if relevant. Notice that tax charges range by state
• Deductions: Staff might contribute a proportion of their gross wages to well being, dental, imaginative and prescient, or different insurance coverage choices offered by your organization. The quantity that the worker shares must be included on the pay stub. Every other deductions, like wage garnishment and union charges, are additionally included.
• Employer contributions: If an employer provides a retirement plan like a 401k or pension, an worker’s contributions to these accounts also needs to seem on a pay stub.
• Paid day without work (PTO): If an employer provides the choice for PTO, the full variety of days taken by an worker must be listed on the pay stub in order that workers can observe what number of days they’ve left with out having to ask a supervisor or worker in HR.
• Web pay: After all deductions are taken, internet pay represents the amount of cash that the worker can really see being added to their account, and the strains above clarify that quantity.

We have gone over all the things that must be included in a pay stub, however it may be tough to visualise precisely the way it’s all laid out. Fortunately, G2 has a readymade template that’s free so that you can obtain and use instantly. 

Alternatively, you too can use payroll software program to generate pay stubs and deal with payroll duties simply. To discover your choices, try the greatest payroll software program on G2 and examine platforms based mostly on actual person critiques.

What are the pay stub necessities by state legal guidelines?

Whereas federal regulation doesn’t require employers to challenge pay stubs, most states do. Relying on the place you reside, the principles can look very completely different. States typically fall into one among 5 classes under.

1. States with no necessities

A small variety of states don’t have any legal guidelines mandating pay stubs in any respect. In case you function in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Ohio, South Dakota, or Tennessee, you aren’t legally required to offer them.

That stated, many employers nonetheless achieve this as a greatest observe to keep up transparency and correct data.

2. Entry states

In most states, employers should make pay stubs accessible in some type, paper or digital. This group contains 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, and Wyoming.

The hot button is that workers should have the ability to clearly see their earnings, deductions, and hours labored.

3. Entry/print states

Some states permit digital pay stubs however add an vital caveat: workers should additionally have the ability to entry or print them simply. In case you’re in California, Colorado, Connecticut, Iowa, Maine, Massachusetts, New Mexico, North Carolina, Texas, Vermont, or Washington, you’ll want to make sure your digital payroll system features a easy means for workers to obtain or print their pay statements.

4. Decide-out states

In sure states, employers can default to digital pay stubs however should give workers the choice to “decide out” and request paper as an alternative. This is applicable in Delaware, Minnesota, and Oregon, the place worker selection is constructed into the regulation.

5. Decide-in states

Lastly, just a few states flip the rule: paper pay stubs are the default, and workers should actively consent to obtain digital variations as an alternative. Presently, Hawaii is the one opt-in state.

Since pay stub legal guidelines can change, verify your state’s Division of Labor web site to verify the most recent necessities.

How lengthy ought to employers hold pay stubs?

Past displaying workers their earnings, pay stubs are a part of the payroll data employers are legally required to maintain. Federal and state legal guidelines require companies to retain payroll documentation for a set time period:

• IRS necessities: Employment tax data have to be stored for no less than 4 years after the date the fourth-quarter taxes are filed for the 12 months.
• Honest Labor Requirements Act (FLSA): Employers should hold basic payroll data for 3 years, and retain any supporting paperwork used to calculate wages (reminiscent of timecards, piece-rate data, or work schedules) for 2 years.
• State legal guidelines: In case your state has an extended retention requirement, employers should observe the stricter normal, federal or state, whichever is bigger.

As a greatest observe, retain payroll data, together with pay stubs, for no less than 4 years to make sure compliance with IRS guidelines and the FLSA, whereas additionally assembly any state-specific necessities.

Payroll software program can robotically generate, retailer, and manage pay stubs in compliance with IRS, FLSA, and state legal guidelines. This not solely reduces the danger of non-compliance but in addition makes it simpler for employers and workers to entry data when wanted.

Need extra? Be taught concerning the greatest practices for payroll administration with this free G2 information. 

This text was initially printed in 2019 and has been up to date with new info.