A pay statement summarizes an employee’s gross pay, taxes and deductions, and net pay. Pay statements are mandatory in many states even though they are typically not required under federal law.
KEY POINTS
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1. Most states require pay statements, and many require that specific information be displayed on them.
Federal law generally requires employers to maintain payroll records but doesn’t require pay statements. As such, pay statement requirements are often determined at the state level.
Many states require employers to provide a pay statement (also known as a wage statement or pay stub) each pay period and include specific information. Only a handful of states don’t require employers to provide specific information on a pay statement.
Are pay statement laws industry-specific?There are relatively few standalone local pay statement laws. Most local requirements either add specific disclosures (such as paid sick leave balances) to the pay statement, are industry-specific or apply only to employers covered by a local wage ordinance. |
2. Pay statement laws vary from state to state.
Compliance can be especially challenging for multi-state employers because pay statement requirements vary by jurisdiction. A pay statement format that works in one state may not satisfy the requirements of another.
For example, let’s take the requirements for an employer with employees in Delaware and Pennsylvania.
For the employees who work in Delaware, pay statements must include:
- Wages due
- The pay period
- Itemized deductions
- Total hours
For employees who work in Pennsylvania, pay statements must include:
- Hours worked
- Rates paid
- Gross wages
- Allowances, if any, claimed as part of the minimum wage
- Deductions
- Net wages
- Beginning and ending dates of the pay period
3. Pay-statement requirements may differ based on the employee’s occupation or method of compensation.
For example, Pennsylvania has additional pay statement requirements for seasonal farm laborers and workers employed by a common carrier by railroad.
In California, the pay statements of employees paid on a piece rate basis have these additional requirements:
- Number of piece-rate units earned and any applicable piece rate
- All applicable piece rates of pay (e.g., $1.00/unit)
- Total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period
- Except for employers paying at least minimum wage compensation for other nonproductive time, the total hours of nonproductive time, the rate of compensation, and the gross wages paid for that time during the pay period
For employees paid on a commission basis, California interprets the requirements for piece-rate employees to also apply to commissioned employees, unless the commissioned employee is exempt from minimum wage. Commissions may be based on the number of products or services sold or on a percentage of the price of the product or service that is sold.
In California, pay statements for commissioned employees must also include the commission rate and the amount of sales per rate. In addition, to the extent a commissioned employee later has commissions deducted (for example, to reflect commissioned items returned by the purchaser), a subsequent pay statement should reflect this adjustment.
4. Depending on the state or local jurisdiction, paid sick leave information may need to be displayed on pay statements.
In some jurisdictions, paid sick leave laws require employers to provide employees with information about their available leave balances, and the pay statement is often the vehicle used to meet that requirement.
For example, some state and local paid sick leave laws require employers to provide employees with a record of accrued, available, or used sick leave each pay period. Employers may be permitted to provide this information on the pay statement or through a separate written document. Requirements vary by jurisdiction, including the frequency of the notice and the specific information that must be disclosed.
5. Some states have rules for electronic delivery.
The rules governing electronic delivery of pay statements vary by state. While some states permit electronic wage statements as long as employees can access them, others require employees to be able to print the statements, request paper copies, or affirmatively consent to electronic delivery.
For example, some states follow an "opt-out" approach, allowing electronic delivery unless the employee requests paper statements. Others impose stricter "opt-in" requirements under which employees must consent before receiving electronic wage statements.
6. Pay statements can reveal pay-calculation errors.
Employees frequently review pay statements to help spot potential pay issues. As a result, errors can lead employees to question whether they were paid correctly. If your pay practices are ever challenged, pay statements may become evidence in the dispute. For instance, one of the most common mistakes by employers is calculating an employee’s regular rate of pay incorrectly for the purpose of overtime.
7. Even when employees are paid correctly and timely, states may penalize employers for pay statement noncompliance.
In some states, pay statement violations can result in penalties that are separate from any dispute involving unpaid wages. This means that an employer may face liability for an inaccurate or incomplete wage statement even when the employee received all wages owed.
Conclusion
Review your pay-statement practices regularly to help identify compliance risks, improve payroll transparency, and address issues before they become larger problems. As your workforce grows or expands into new jurisdictions, monitor changes in state and local requirements and ensure that your pay statements continue to meet applicable standards.
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