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

Operating a small enterprise comes with many obligations, and managing payroll is without doubt one of the most vital duties.

However in terms of pay stubs, are you assured you’re offering your staff with all of the important info?

Also referred to as payslips, pay statements, or wage statements, pay stubs aren’t only a piece of paper. They’re a document of earnings, deductions, and compliance that may defend your small business and construct belief along with your group. You possibly can 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 troublesome? Don’t fret. 

On this information, we’ll clarify all the pieces you’ll want to find out about creating and managing pay stubs and guaranteeing your small business 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 staff 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 legislation doesn’t require employers to supply pay stubs, many states have particular rules 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 document for each you and your staff. They are often important when resolving disputes, getting ready for audits, or verifying employment historical past.
• Worker monetary planning: Pay stubs give staff a transparent breakdown of their earnings, serving to them perceive their funds higher. That is particularly essential for budgeting, making use of for loans, or submitting taxes.
• Professionalism: Constantly offering pay stubs displays nicely on your small business. It exhibits that you just take payroll critically and are dedicated to working an organized and accountable operation.

• Employer and worker particulars: Firm identify and deal with, worker identify and deal with, 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 encompass federal earnings tax, Federal Insurance coverage Contribution Act (FICA) taxes (Medicare and Social Safety), and state and native taxes, if relevant. Notice that tax charges fluctuate 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. Another 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 must also seem on a pay stub.
• Paid day off (PTO): If an employer provides the choice for PTO, the whole variety of days taken by an worker must be listed on the pay stub in order that staff can observe what number of days they’ve left with out having to ask a supervisor or worker in HR.
• Internet pay: After all deductions are taken, web pay represents the amount of cash that the worker can truly see being added to their account, and the strains above clarify that quantity.

We have gone over all the pieces that must be included in a pay stub, however it may be troublesome 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 evaluate platforms primarily based on actual person critiques.

What are the pay stub necessities by state legal guidelines?

Whereas federal legislation doesn’t require employers to subject pay stubs, most states do. Relying on the place you reside, the foundations can look very completely different. States usually fall into certainly one of 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. When you function in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Ohio, South Dakota, or Tennessee, you aren’t legally required to supply them.

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

2. Entry states

In most states, employers should make pay stubs accessible in some kind, 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 secret’s that staff should have the ability to clearly see their earnings, deductions, and hours labored.

3. Entry/print states

Some states enable digital pay stubs however add an essential caveat: staff should additionally have the ability to entry or print them simply. When 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 staff the choice to “choose out” and request paper as a substitute. This is applicable in Delaware, Minnesota, and Oregon, the place worker selection is constructed into the legislation.

5. Decide-in states

Lastly, a number of states flip the rule: paper pay stubs are the default, and staff should actively consent to obtain digital variations as a substitute. Presently, Hawaii is the one opt-in state.

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

How lengthy ought to employers preserve pay stubs?

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

• IRS necessities: Employment tax information have to be stored for at the very least 4 years after the date the fourth-quarter taxes are filed for the 12 months.
• Honest Labor Requirements Act (FLSA): Employers should preserve common payroll information for 3 years, and retain any supporting paperwork used to calculate wages (reminiscent of timecards, piece-rate information, or work schedules) for 2 years.
• State legal guidelines: In case your state has an extended retention requirement, employers should comply with the stricter normal, federal or state, whichever is larger.

As a greatest observe, retain payroll information, together with pay stubs, for at the very least 4 years to make sure compliance with IRS guidelines and the FLSA, whereas additionally assembly any state-specific necessities.

Payroll software program can mechanically generate, retailer, and set up pay stubs in compliance with IRS, FLSA, and state legal guidelines. This not solely reduces the danger of non-compliance but additionally makes it simpler for employers and staff to entry information when wanted.

Need extra? Study 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.