A pay stub, or payslip, is a document created by employers that breaks down an employee’s pay for each pay period. It typically includes details of an employee’s pay rate, gross pay, deductions, contributions to a retirement or healthcare plan, and net pay.
There are no federal laws requiring employers to issue pay stubs to employees, but they are required in many states. Even if they’re not required, it’s a good idea for your business to issue paycheck stubs because it enables employees to understand how their pay is calculated and identify any payroll issues right away.
What Information Is Included on a Pay Stub?
A pay stub typically includes the following pieces of information:
- Employer details, including the company’s name and address
- Employee details, including the employee’s name, address, and Social Security number
- Date range of the pay period covered by the pay stub
- The employee’s base wage rate
- For hourly employees, hours worked (including overtime hours) during the pay period
- Gross wages paid during the pay period
- Deductions for employment taxes, including federal and state income taxes, Medicare taxes, and Social Security taxes
- Deductions for health insurance or life insurance premiums
- Employee contributions to a retirement plan, such as a 401(k)
- Net pay after deductions and contributions
Are Pay Stubs Required?
There are no federal laws requiring employers to issue payslips to their employees. Under the Fair Labor Standards Act (FLSA), employers are only required to maintain payroll records for a minimum of three years. However, the FLSA does not guarantee employees a right to view their payroll records.
In the absence of federal legislation, most states have laws requiring employers to issue pay stubs. Some states do not require a payslip, including Arkansas, Florida, Georgia, Louisiana, Nebraska, Ohio, South Dakota, and Tennessee.
However, there are some exceptions in these states—for example, in Ohio, employees under the age of 18 must receive a payslip in Ohio. In addition, some union contracts require unionized employees to receive payslips.
Be sure to check the pay stub legislation for each state in which your business operates to determine whether you must issue payslips and what information must be included.
Benefits of Pay Stubs
Regardless of whether payslips are required by law in your state, many businesses choose to issue pay stubs to all employees.
Pay stubs keep employees informed about their wages for each pay period, as well as deductions for employment taxes and contributions to benefit plans. Payslips also mean that employees are more likely to notice any issues with their pay and bring them to your HR team quickly. Resolving payroll issues early is important to establish trust among your employees and avoid compensation lawsuits and penalties.
Many employees also use pay stubs as proof of employment or income. This can be useful if they need to apply for a loan.
In addition, payslips can help employees with tax planning. Employees can keep on top of how much they’ve paid in income taxes by checking their payslips, instead of waiting for their W-2 form at the end of the year.
Pay stubs can also be useful for employers. They typically satisfy the record-keeping requirements of the FLSA, as long as you hold onto them for at least three years.
How to Generate Pay Stubs
Your payroll software can probably create a pay stub for each of your employees as you run payroll. It’s also possible to create payslips manually, but this is time-consuming and can lead to errors.
If your payroll or free HR software offers a self-service portal for employees, they can typically access their payslips online this way. However, some states don’t consider electronic pay stubs to be sufficient.
Some states require that employees opt in to receive electronic payslips. Otherwise, they must be given paper stubs. In addition, some states that allow electronic payslips require that employees have the ability to print their pay stubs if they wish. Be sure to check the rules around electronic payslips for the states in which your business operates.
Pay stubs are documents given to employees that break down their gross pay, deductions, and net pay for each pay period. While payslips are not required by federal law, they are required in many states, and there are many reasons you might consider issuing them.
Pay stubs can satisfy the record-keeping requirements of the FLSA and keep employees well informed about their pay. Most payroll software can generate pay stubs for employees, making it easy for you to incorporate into your company.