Legal Pay Stub Requirements for Employers

Payroll records are an important part of documentation for any employer. Pay stubs are important documents that contain an employee’s pay details. It is essential to familiarize yourself with the legal pay stub requirements. These are the rules and regulations guiding them. 

It enables you, the employer, to adhere to the necessary laws. You'll avoid facing the repercussions that may follow. 

This article provides all the basic information on legal pay stub requirements. You'll learn what to bear in mind when it comes to payroll methods, including electronic payroll.

Why Legal Pay Stub Requirements?

A pay stub is a kind of receipt that indicates the employee’s pay. It shows gross pay, deductions, and net pay. It gives the employee’s pay for the pay period. This would have been set in reference to the relevant wage structure. Pay stubs have several functions in the business.

Pay stubs assist employers in managing payroll. They offer documented evidence of the wages paid and deductions made. Another reason they are important is for the calculation of accounts and taxes. This is why there are certain requirements guiding them. 

Pay stubs provide the best opportunity for employees to understand their earnings. They learn how their wages are determined and how the money is spent. They are used while applying for loans, mortgages, or renting an apartment. Summarily, they are used where proof of income is required. Pay stubs also help employees in filing their taxes. Given their importance, the law needs to ensure they're properly done.

Federal Legal Pay Stub Requirements

Currently, there's no federal law touching on what the employers must provide in pay stubs. Employers and employees can seek protection under the FLSA. This law was passed in 1938 to protect workers from unfair treatment in employment. It mainly regulates minimum wages, overtime provisions, and record-keeping.

Instead, the FLSA established certain standards with respect to records. This includes employees’ wages, hours worked, and conditions of work. Employers should note that the IRS mandates them to retain payroll records. This is for not less than four years from the year of filing. However, certain state pay stub laws may allow for longer retention of records. Most employers reasonably retain payroll records for about seven years.

Federal laws do not mandate the inclusion of this information on the pay stub. So, it does not touch on what should be provided to the employees.

Employers are not completely free to do away with pay stub requirements. The laws governing the issuing of these are offered at the state level. Employers must ensure that they conform to the laws of the states in which they operate.

State-Specific Pay Stub Requirements

The legal actions also differ depending on the state in which a company operates. It may also depend on the state where the company’s employees reside. Pay stub requirements for states can be categorized as follows.

No Requirement States

Nine states have no laws governing the provision of pay stubs for employees. These states are: 

• Alabama

• Arkansas

• Florida

• Georgia

• Louisiana

• Mississippi

• Ohio

• South Dakota

• Tennessee

These states have no requirements for employers to provide pay stubs. And in case they do, there are no guides for how they are to be formatted. However, in these states, it is still advisable to issue pay stubs. It is helpful for operations despite no legal pay stub requirements.

Access States

The most common category is the access states. These states require employers to give employees means to access their pay information. However, they don't specify how this has to be done. Employees can be provided with pay stubs either in electronic or hard copy form. Usually, it depends on the employer’s choice or capabilities. These are the access states:

• 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 States

Eleven states have more rigid standards. Here, it is compulsory for the employers to issue the pay stubs in written or printed form. These access/print states are:

• California

• Colorado

• Connecticut

• Iowa

• Maine

• Massachusetts

• New Mexico

• North Carolina

• Texas

• Vermont

• Washington

Here, it is mandatory for employers to offer employees a physical copy of pay stubs. Nevertheless, the use of electronic pay records is permitted. The only condition is that employees can still get a hard copy.

Opt-In and Opt-Out States

Some states have peculiar policies concerning pay stubs. Hawaii is an “opt-in” state. So, it is the employer’s obligation to give the employee physical copies. The employee then has the option to choose electronic delivery of pay stubs.

Delaware, Minnesota, and Oregon are “opt-out” states. They also enable electronic payroll under one condition. Employees can decline to receive them and ask for paper stubs instead. Employers are bound to provide paper ones if the employee requests.

It is important to understand the category of the state compliance rules under which your business operates. This ensures that it complies with the pay stub laws. All employers with operations in various states are bound to the state’s regulations. They also have to consider the requirements in those states where they have employees.

Consequences of Non-Compliance With Pay Stub Laws

Failure to adhere to pay stub standards can be costly for employers in several ways. Essentially, the fines differ by state, though they can be quite steep, even more so in second and subsequent offenses or large entities.

Let's take California for example. This is one of the most particular states in terms of pay stub requirements. Employers are liable to a minimum fine of $50 for the first offense. Then, $100 each for subsequent offenses per employee concerned. The maximum fine for each violation is $4000. This will pile up if the company has numerous employees.

New York entails fines on a per-employee-per-day basis, and the maximum amount is $250. It’s important to note any of the employees may proceed to sue the company. Then, the penalty can rise to $5,000.

Besides fines, there are other penalties that businesses may suffer in case of non-compliance.

The company may be audited by the Department of Labor (DOL) or Internal Revenue Service (IRS). This is if the authorities find that a company repeatedly fails to adhere to the laws.

There is also a possibility of litigation. The company may have to face steep legal fees. This is in addition to the compensation they have to pay to the employees.

A company can also lose its reputation and erode trust. This may cause detriment to a business for a long time. In severe or malicious cases, there may be mass violations. This may lead to business closure.

Bottom Line

Knowing legal pay stub requirements is important for compliance. Whether you choose paper or electronic payroll, the essentials must be included. The distribution has to be according to state laws. Due attention to pay stub requirements proves that employers are determined to be lawful. This is the basis for future cooperative relations.

Adhering to legal pay stub requirements is essential for compliance and maintaining trust. Our pay stub tool makes it easy to generate accurate and compliant pay stubs. Streamline your payroll process and ensure your pay stubs are professional and reliable. Visit today to simplify your payroll management.

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