Are you wondering what’s required by law on paycheck stubs? Find out everything you need to include in this informative guide.
There are over 30 million small businesses in the United States.
If you’re thinking about starting your own business, the actual business aspect of it can be overwhelming. While you know you have a profitable business idea, you may be unsure if you can handle all the behind-the-scenes details. But, with a little research, you can easily learn everything that it takes to properly run a business.
If your business will involve more employees than just yourself, you’re going to want to first figure out how to legally compensate them. Keep reading to find out everything that’s required by law on paycheck stubs.
States That Don’t Require Paystubs
Before discussing what to include on a paystub, it’s important to note that not all states require paystubs in the first place.
The following states do not require businesses to provide pay stubs to their employees:
- South Dakota
Even if you conduct business in one of the no-requirement states, it’s still a nice gesture to provide a paystub anyways. Your employees will appreciate you going the extra mile for them.
If you live in a state not listed above, you’re required to provide some sort of paystub. Your state could require print or electronic pay stubs or even require that employee opt-in or out of receiving one. You’ll want to look further into the specific requirements of your state.
Employee and Employer Information
To start with, pay stubs should include identifying information for both the business and the employee getting paid.
For business information, the document should include the legal name of the business along with its address. Some businesses also choose to include a phone number.
For employee information, it should include the legal name and home address of the paystub recipient. If the business has several employees, you can include what department the employee works in or what position they hold. Finally, if the employee has a direct deposit set up, you’ll want to include the bank account information of the pay stub as well.
Pay Period and Hours Worked
Each paycheck stub should clearly define the associated pay period. This could be one week, two weeks, or even a month-long period depending on the business’s pay schedule. Make sure to include the exact days, month, and year so that the period is clearly defined.
Then, the paystub will also include the number of hours worked by the employee. If the employee is salaried, this can be noted instead of the actual number of hours worked.
If any sick, vacation, or personal days were used during the pay period, this should be noted somewhere within the hours worked section as well. Some employers chose to make this a permanent section and include the remaining number of hours for these benefits on each paystub.
Tax and Other Deductions
Some of the most important aspects of a paystub are the deductions.
To start, a paystub should include the required tax deductions. This includes federal, state, and local tax deductions based on the employee’s specific withholdings. The deductions are also required to include both social security and medicare.
There are also voluntary deductions that should be noted. These include insurance, retirement, health-savings accounts, and childcare assistance deductions.
Not only is showing the deductions required, but it also provides your employees with peace of mind that these deductions are being taken out of their paychecks correctly.
Gross and Net Pay
Each check stub will include both the gross and net pay amounts.
The gross pay amount is calculated as the hourly rate of the employee times the number of hours worked. But, this isn’t the amount of money the employee will actually receive from the paycheck.
The amount of money the employee actually receives is the net pay calculation. This is the gross pay amount minus the total amount of deductions for the pay period.
How to Create Paycheck Stubs as an Employer
Now that you know everything that to include on a paystub, how do you go about making them for your employees? If you’re a small business owner with only a few employees, you can easily create pay stubs on your own.
To start, look up your specific state requirements. Then, gather and document the required information listed above. Then, find an online pay stub template and simply enter the necessary information.
From there, you can then provide the paystub to your employees through a printed or electronic document depending on your state requirements. And don’t forget to keep a copy of each employee’s paystubs for your business records.
If you run a larger business and don’t have the time or resources to devote to bookkeeping responsibilities, it’s time to invest in someone that does. You can either choose to hire an in-house bookkeeper as an employee of your business or outsource the work to a bookkeeping company. You’ll want to evaluate the costs, pros, and cons of both options before deciding on one.
Looking for Other Ways to Stay in the Know?
After reading this guide, you should know what’s required on paycheck stubs and even how to create your own.
But, running a business requires a lot more knowledge than that. If you’ve recently launched a new business or are considering starting one, it takes a lot of background knowledge.
For a never-ending resource of tech and business advice, bookmark the News section of this site. There, you’ll find advice on everything from transitioning to a paperless business to conducting employee interviews by video.