Pay Stub

Why Do Pay Stubs Matter?

Pay stubs provide transparency into how employees' wages are calculated, making it easier to identify errors in tax withholdings or benefit contributions. They are often required as proof of income for loans, rental agreements, or government benefits.

Each pay stub serves as an essential payroll record, ensuring compliance with wage and hour laws and providing documentation if disputes arise.

Do You Legally Have to Get a Pay Stub?

At the federal level, the Fair Labor Standards Act (FLSA) does not require employers to provide employees with paycheck stubs.

However, state laws vary. Some states mandate that employers deliver printed pay stubs with each paycheck, while others permit electronic versions as long as employees can easily access them online or elsewhere.

A few states don’t require pay stubs at all, though offering them remains a best practice for promoting transparency and maintaining accurate payroll records.

How Long Should You Keep a Pay Stub?

Employees should keep their pay stubs for at least one year to verify the accuracy of their W-2 forms and ensure correct reporting on their tax returns. However, holding on to them for two to three years can be helpful, especially when preparing for significant financial transactions, like applying for a mortgage, refinancing a loan, or disputing an error in payroll or benefits contributions.

For employers, the IRS generally requires maintaining payroll records for at least four years, though some states may have stricter retention rules. Keeping detailed check stub records on file helps ensure compliance, support audits, and resolve any employee wage disputes that may arise.

What Does a Pay Stub Look Like?

A pay stub gives a detailed breakdown of an employee’s pay and deductions for a specific period. While the format may differ by employer or payroll software, most pay stub examples include:

• Employee information: Name, address, and a partially masked Social Security Number (SSN) for identification.
• Pay period: The start and end dates for the wages reported on the pay stub.
• Gross pay: The total amount of earnings before withholding any taxes or deductions.
• Deductions: Itemized withholdings for federal, state, and local income taxes, Social Security and Medicare taxes, benefits contributions (e.g., health insurance or retirement plans), etc.
• Net pay: The actual amount deposited or distributed to the employee after all deductions are made (i.e., their “take-home” pay).
• Year-to-date (YTD) totals: Cumulative figures for wages, taxes, and deductions since the start of the calendar year.
• Additional earnings or benefits: Overtime pay, bonuses, commissions, or employer contributions to benefits, such as retirement accounts or insurance premiums.
• Accrued time off (if applicable): Some pay stubs also track the employee’s vacation or sick time balances.

How Do You Make Pay Stubs?

Employers who don’t know how to make pay stubs have multiple options, varying in convenience and scalability.

Payroll software remains the most efficient choice, as modern platforms can automatically produce digital or printed pay stubs online, complete with all legally required details. These systems also support accurate payroll recordkeeping for compliance and tax reporting.

A virtual pay stub generator, including online tools (e.g., a pay stub calculator) and blank pay stub templates, gives employers flexibility to create customized stubs tailored to their workforce.

Meanwhile, some businesses still use a manual pay stub template, often in spreadsheets or hand-filled formats. While perhaps workable for sole proprietors, this manual method can quickly become impractical when managing multiple employees.

Common Pay Stub Mistakes

Mistakes on a paycheck stub can result in compliance penalties, payroll discrepancies, and employee dissatisfaction. Some common payroll errors include:

• Incorrect tax withholdings: Miscalculating federal, state, or local taxes can lead to underpayment or overpayment.
• Missing deductions: Forgetting to include withholdings for benefits contributions, garnishments, or other required deductions can create compliance issues.
• Failing to update year-to-date (YTD) totals: Outdated YTD earnings or deductions can confuse employees and cause discrepancies when reconciling W-2 forms.
• Omitting key information: Leaving out required details, such as pay periods, overtime pay, or employer contributions, can violate state laws and undermine employee trust.
• Noncompliance with state laws: In states where paycheck stubs are legally required, failing to provide them, regardless of format, can lead to fines and legal action.