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What are pay stubs? Employer guide and reference

Updated: August 5, 2022

By: Jon Davis

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Here’s a startling fact for employers: Nearly half of American workers say they would start hunting for a new job after a mere two errors with their paycheck, according to The Workforce Institute at Kronos.

 

Keeping your team informed about the breakdown of their earnings and take-home pay is just one of the reasons that getting pay stubs right is so important. Pay stubs can also be used by workers as proof of income when renting an apartment or leasing a car. It’s one of those documents that people always expect to be right since it plays a role in so many parts of everyday life.

 

To get a broader picture about why pay stubs are important, the type of information they can include, and how they can help keep your business in check, let’s get into some of the specifics.

What is a pay stub?

Starting at the most basic level — a pay stub is a record of payment. It provides details surrounding how many hours an employee worked, the amount of money they’ve been paid, their rate of pay, and the specific time period for which they received their wages.

 

There’s no shortage of payroll terms when referring to these pay stubs, which means you may also hear them referred to as payslips, pay statements, or paycheck stubs. No matter what you choose to call them, pay stubs make it easy for employees to review deductions, tax withholdings, and earnings.

Payroll that will never let you down

What are pay stubs used for?

A pay stub’s purpose is to provide employees with a record of wages earned and hours they’ve worked — including any tax withholdings or 401(k) contributions.

 

Here are the typical details included in pay stubs:

  • Employee information, including first and last name, address and social security number (and many payroll companies allow you to mask or truncate the information for security purposes)
  • Employer information, including company name and physical address
  • Total wages the employee is paid or their gross earnings (compensation they earned before any employee contributions and deductions or tax withholdings)
  • Hours the employee worked
  • Pay rate
  • Dates of the pay period
  • Tax withholdings (Social  Security, Medicare, or federal income tax)
  • Contributions to retirement plans
  • Deductions withheld for items such as life or health insurance
  • Net pay (the total dollar amount the employee takes home after all taxes, contributions, and deductions are subtracted from gross earnings)

 

Some states require employers to include the details of paid time off (PTO), sick time accrual and the balances for each. Other states — such as New York and Oregon — require employers to list a company phone number. The good news is most state websites provide specific details surrounding what must appear on pay stubs, so you can find the requirements with just a few clicks.

 

There’s also some reasons why providing pay stubs can make good business sense. Read on to find out why this is the case.

Pro tip:

Employers can use pay stubs to produce W-2s for their workers. Employees can then use pay stubs to review and reconcile their W-2. In other words, providing detailed pay stubs is a win-win for helping everyone get things right at the end of the year.

Why are pay stubs important?

 

Recordkeeping 

You never know when Uncle Sam might come calling — and employers are expected to retain payroll records for at least three years. Keeping accurate pay stubs can also be helpful if an employee claims you’re not paying them at an agreed-upon rate.

 

Employee day-to-day 

For many people, pay stubs are one of the most common ways of providing proof of income and employment. In some instances, they can help when securing loans or applying for a credit card. Providing statements employees can count on — that are accurate and timely — can go a long way in helping workers go about their daily lives without any hiccups.

 

Given that pay stubs can be so useful for any compensated-related discrepancies as well as for helping employees make financial decisions, it might be surprising to learn that employers are not always required to provide them.

Pro tip:

If you are a contractor, pay stubs can be a great tool for analyzing your business progress and growth. By reviewing billable hours, you can make more informed decisions on questions such as:

  • Is it time to hire a subcontractor?
  • Do you need to increase your subcontractor count?
  • Or should you increase what you charge for services?

— Kelly Long, Senior Product Consultant and CPP

Are employers required to provide pay stubs?

So many of us in the workforce have experienced receiving pay stubs that it can be easy to believe that providing this document is a federal requirement. But the reality is that there is no government law dictating that employers provide pay stubs. States typically set the rules, and there are some different designations to keep in mind.

 

States with no pay stub requirements

Some states don’t have any rules requiring employers to provide pay stubs. States that fall into this category include:

  • Alabama
  • Arkansas
  • Florida
  • Georgia
  • Louisiana
  • Mississippi
  • Ohio
  • South Dakota
  • Tennessee

 

States with pay stub access requirements

On the other hand, some states require employers to produce a statement of an employee’s pay information, either digitally or in print. For companies that opt for electronic documentation there are online payroll services that make it easy for employees to access pay stubs 24 hours a day, seven days a week.

 

States that require the provision of pay stubs include:

  • 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

 

States with pay stub access and print requirements

If you’re doing business in one of the access/print states, you’ll need to provide either a written or printed pay stub for employees. Employees who receive these digitally must have an easy way to access and print them.

 

Drum roll, please! The access/print states are:

  • California
  • Colorado
  • Connecticut
  • Iowa
  • Maine
  • Massachusetts
  • New Mexico
  • North Carolina
  • Texas
  • Vermont
  • Washington

 

States with paperless pay stub opt-out requirements

As you decide on your company’s preferred payroll and pay stub program, it’s important to note that if you choose an electronic delivery method, employees must be given the ability to opt-out in certain states.

 

The so-called ‘opt-out’ states require that employees be able to receive paper pay stubs if they choose. States in this category include Delaware, Minnesota, and Oregon.

 

States with paperless pay stub opt-in requirements

Just as there are opt-out states, there are also opt-in states. Well, at least one.

 

At the moment, Hawaii is the only state that requires an employee’s consent before implementing an electronic paperless pay system. This means employers in Hawaii must provide a written or printed pay statement with details of the employee’s pay information unless the employee agrees to receive their pay statement electronically.

 

The table below provides a handy summary of state pay stub requirements.

 

Summary of pay stub requirements by each state

 

State type and rules What does it mean? Which states?
No state requirements Employers don’t have to provide pay stubs to employees. Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Ohio, South Dakota, and Tennessee.
Access states Employers have to provide employees pay stubs either in digital or print form. Alaska, 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.
Access/print state Employers have to provide employees with a printed or digital pay stub. If you provide them digitally, employees need to be able to access them and have a way to print them. California, Colorado, Connecticut, Iowa, Maine, Massachusetts, New Mexico, North Carolina, Texas, Vermont, and Washington.
Opt-out states In these states, when an employer starts a paperless program, they must allow employees to opt-out if they prefer to receive hard copy stubs instead of digital pay stubs. Delaware, Minnesota, and Oregon.
Opt-in state Employees have to provide their consent to be opted into an electronic program. Hawaii

 

What do pay stubs look like?

You won’t find many bells and whistles on pay stub documents and that’s perfectly okay. Pay stubs typically have a simple layout that makes it easy for employees to quickly reference details such as deductions, net pay, and wages. Every employer’s pay stub can look a little different, but here is an example of a common pay stub format:

 

pay stub sample

 

Pay stubs serve many purposes

At the end of the day, it’s the responsibility of an employer to withhold and pay taxes — and pay stubs are an efficient way to calculate and keep a record of these transactions.

 

Providing pay stubs can also go a long way toward creating trust between employers and their employees. They help your team members keep track of their pay — and create a paper (or digital) trail should there ever be a  need to share records with the IRS or a state agency.

 

Now that we’ve covered some of the basics about pay stubs, keep clicking through our payroll process guides for more references and learning material. And good luck to you and your team as you grow your business.

 

This article is for informational purposes only and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors for formal consultation.

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Jon Davis is the Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.