Pay stubs are a small piece of paper (or digital file) with a big purpose. If you don’t know what paycheck stubs are, how they work, or why they’re so important, you really need to read this.
What is a Paycheck Stub?
Let's start with the basics. A paycheck stub, aka pay stub, aka payslip, is a break down of all the details pertaining to that pay period for an employee. Pay stubs will list several pieces of information, including:
- The current month’s earned wages
- Gross wages
- The overall yearly wages accrued
- Any taxes that were paid out for that month’s paycheck
- Any deductions that were taken from the paycheck
Finally, the paystub has the net earnings or how much you earned after all the necessary amounts were taken out. If you pay your employees with a physical check, then the pay stub will generally be attached to the paycheck. It'll be separated by a perforated line so it can be easily detached and saved for records. If you generally pay your employees via direct deposit, like the vast majority of employers today, then the paycheck stub will be a digital file generated by the payroll software you use to process payroll.
Do I Have to Give My Employees Paycheck Stubs?
It’s nice to have such an organized record, but is all this really necessary? In fact, it is. While there is no federal law mandating the administration of paycheck stubs, most states legally require employers to give their employees pay stubs. What needs to be on the stubs varies from state to state, but the majority of states have some sort of paycheck stub requirement.
What Are the Advantages of Providing Employees with Paycheck Stubs?
Even in states that do not require employers to give employees paycheck stubs (and all the more so in states that do), there is still a very good reason to get into this practice. The Fair Labor Standards Act (FLSA) requires employers to keep accurate and up to date records of all of the hours worked, and all wages paid out to each employee. Pay stubs are the easiest and most efficient method for keeping these legally-required logs.
Another reason you’d want to give paycheck stubs is for tax purposes. When the end of the year and tax seasons come around, the last thing you want is to start scrambling for all the payroll details you’ve processed throughout the year for each employee. Pay stubs are a simple way to keep all the tax filing data in a single, easy to access place for instant referencing.
Finally, paycheck stubs promote transparency within an organization. Employees have a right to know how much they've earned, and stubs are a clear and easy way to keep good track of all of this information. By providing these simple record-keeping tools, you keep the lines of communication clear and open with your employees, something that all workers appreciate. Paycheck stubs actually promote transparency and openness and bolster a more positive workforce relationship.
What's Required to Be on an Employee's Paycheck Stub?
This is a tricky one. Each state has its own requirements for paycheck stubs. As we already mentioned, some states don’t require anything at all. If you have a business in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Ohio, South Dakota, or Tennessee, you are in the clear. Bear in mind, though, that you still have the FLSA requirements to meet, but you have more flexibility with what you put on your pay stubs.
Other states like Alaska, Kansas, Nebraska, New York, and South Carolina (the list goes on) require that you give your employees some sort of access to the paycheck stub information. So, you can meet this requirement by creating digital pay stubs and sending these out to employees.
Meanwhile, California, Connecticut, Massachusetts, New Mexico, North Carolina, (and a few more states) business owners need to have an actual physical pay stub created. This can be written or printed, but it has to be a physical copy.
Some states like Delaware, Minnesota, and Oregon have opt-out policies for paycheck stubs, while Hawaii is currently the only state to have an opt-in policy.
Paycheck Stub Makers: The Best Solution for Employers
Now you know the requirements and understand the benefits of having paycheck stubs. The next obvious question is, how do you create them. A simple Google search will reveal hundreds (at least) of free paycheck stub makers online. Is this an option? Yes. Is it a good option? No, and here’s why.
Free paycheck stub makers will give you the bare minimum. They’ll create your paycheck stubs on a basic level, but then you’re on your own. These free tools won’t check that you’ve complied with local and federal tax laws, and they won’t check that the information on your pay stubs is correct. For that, you’ll have to hire a CPA, a pricey job for outsourcing.
What's the best solution for employers who want to remain compliant and not break the bank? Payroll software. This solution offers paycheck stub makers built-in, the option to check your records, and cost a fraction of what CPAs will charge you. Payroll software ensures that you are compliant and also accommodates your other payroll needs. What's more, this software will provide employers with other benefits such as time-tracking and HR benefits management.
Here are a few of the top payroll software solutions to date.
- Takes care of all tax filing and compliance
- Works in all 50 states
- Unlimited employees
- Basic plan is lacking in features
Gusto is one of the biggest payroll software options out there. It works well for small businesses, large corporations, and accountants thanks to its comprehensive tools and up to date tax compliance system. Gusto integrates with software like Xero, QuickBooks, Clover, and Expensify. So, all of your information is synced automatically, and you don't have to waste time manually syncing or inputting any data. And Gusto works in all 50 states, so you're covered no matter where you do business.
- Automated and error-free processing
- Employee and self-service options
- 2-month free trial
- No pricing info on the site
ADP is one of the most affordable payroll services, and it’ll calculate all your taxes, W2s, 1099s, and more as well. Something really unusual is that specialists are available 24/7 to help you with any tax compliance or payroll emergency that comes up. What’s more, ADP lets you process payroll for all of your employees with a single plan, making it even more cost-efficient. Plus, ADP offers a 2-month free trial, so you’ve got nothing to lose!
- Integrates with lots of other apps
- Customized payroll services
- Full compliance with state and federal regulations
- Not much info on the website
Deluxe is a professional payroll service that works with all companies large and small. The software covers every aspect of payroll and more, including tax filing, HR solutions, and employee time tracking. Deluxe offers flexibility and customization, so you get the services you want without having to pay for the extras that you don’t. With a comprehensive dashboard, payroll register, and new hire reporting, Deluxe covers all the bases.
- Several plans to choose from
- Flexible and customizable
- Hundreds of add-ons and integrations
- Add-ons can quickly get expensive
Quickbooks is a huge name in the accounting world, so creating a payroll software to streamline this process just makes sense. Intuit by QuickBooks is a sleek, simple, and surprisingly easy to use payroll solution that simplifies every step of the process. From connecting your bank accounts for auto import to smart reporting for detailed and deep analytics, QuickBooks makes compliance and payroll processing a snap.
- Constantly updating tax requirements
- Various workers comp policies
- HR benefits that are always being amended
- Doesn’t track pay increases
Paychex is an all-in-one payroll processing solution. From HR benefits to time and attendance tracking, tax compliance, and onboarding, Paychex takes the struggle out of each of these important business tasks. Best of all, everything can be handled and monitored from a single dashboard. Paychex tracks information in real-time and syncs with many of the tools you are already using for the most accuracy and efficiency possible.
Paycheck Stubs Made Easy
Payroll is complicated enough. Do yourself a favor and let a convenient, efficient, and cost-effective payroll software take care of all the payroll processing, tax compliance, and paycheck stub requirements for you. This way, you can focus on the more important aspects of your business.