Too many businesses overlook the rules for properly maintaining pay statement requirements.
The rules are complex and many. And, vary by state, industry, and situation.
A lot to know and do, to keep your organization compliant and risk free.
Companies already face many risks. As a payroll manager, last thing you need is to add more risk.
Class action suits are regularly brought against fast-food chains, hospitals and other organizations where many employees are paid hourly.
Nearly half them are filed in California where state law is very worker-friendly.
Imagine the states that are less employee-friendly. Or better, don’t…just do the right things.
Let’s have a look at some of those ‘right things’ for getting and staying pay statement compliant.
Regulations vary by state
A few examples from the complex to the simple
For California, the rules for keeping wage statements are complex. Might even look nit-picky, too. But there’s legitimate policy reasons behind most of them.
Workers should know how wages are calculated, so they can verify if they are being paid correctly.
The most common mistakes are technical- by neglecting to include required information.
Make a mistake or omission- this could cost you thousands.
For employee pay stubs include… How much they earned. How much they worked. When they worked. Deductions made. And all the others here.
Also, don’t forget about the Healthy Workplace Healthy Family Act.
This entitles employees to accrue one hour of paid sick leave for every 30 hours worked. But, employers can limit use to 24 hours or three days of accrued leave each year. You must show this on a pay statement (or a document issued the same day as a paycheck).
A lot to be aware of, for sure. And…
Does your business operate across many states? Don’t employ a one-size-fits-all approach. Which is common. And costly.
See the most common pay statement mistakes here.
New York is similar to California in complexity and rules.
Here’s a list of all the items you must include in a pay statement.
California and New York- two states where it’s critical to stay on top of the pay statement game. Let’s look at a couple other states- that are a bit simpler.
For Michigan, there’s much less you need to track on pay statements:
- Hours worked (except for executives, administrators, or professionals)
- Gross wages paid
- The pay period for which payment is being made, and…
- A separate itemization of deductions
Simple right? Just don’t get it wrong. Otherwise, how are you going to explain this to your boss?
Want simpler yet?
Arkansas has no laws for what goes on a pay statement.
- Wage rates
- Dates of pay
- Employment policies
- Fringe benefits, or…
- Other terms and conditions of employment
Don’t believe us? Fine. See for yourself here.
Wait, there’s more.
Four more. Categories of rules for various states, that is.
❱ NO REQUIREMENT STATES
States in this category do not require employers to provide a statement with details of an employee’s pay information.
You have the option to deliver an electronic pay statement, or not.
❱ Applies to: Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Ohio, South Dakota, Tennessee
❱ ACCESS STATES
For these states, you’re required to provide a detailed statement of employee pay information.
There’s no requirement the pay statement be in writing or on paper.
Reasonably, you can comply with the pay statement requirements in these states by furnishing an electronic pay statement. Which employees must be able to access.
Most states have adopted this interpretation. Though some state agencies may might require additional items like the capability for employees to print the electronic statements.
❱ Applies to: 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
❱ ACCESS/PRINT STATES
For these states, you must provide a pay statement with employee pay information details. For written or printed.
Pay statements are not required to be delivered with the check or in another medium.
But if you do provide electronic statements, you must ensure employees can print them.
Know that some state agencies require a bit more. Like an employee’s consent to receive the pay stub electronically.
❱ Applies to: California, Colorado, Connecticut, Iowa, Maine, Massachusetts, New Mexico, North Carolina, Texas, Vermont, Washington
Are you operating in Hawaii? Want to pay employees electronically? Check with each employee.
Employees must give consent for receiving electronic pay statements.
Also, you must provide a written or printed pay statement with details of the employee’s pay information.
❱ Applies to: Hawaii
When the state adopts a specific method of delivery (such as on the paycheck or pay envelope), electronic delivery requires employee consent.
Are you paying employees electronically in one of these states?
If so, you must give them an option to opt out, so they can get paper pay statements.
❱ Applies to: Delaware, Minnesota, Oregon
What states are you operating in?
Need to know the rules and laws for pay statements in those states?
Here’s one place to look. Pick and click for your states.
Know, this post is for guidance only. It’s not comprehensive. Consult your legal advisor to get specifics for your states and needs.
Regulations vary by industry
Rules by state alone might not be enough to be compliant.
An important example of this….
Some employees are paid by the job, by the task, or by the number of pieces they work on.
When employees are paid by the piece, pay statements must separately show the number of piece-rate units earned and the applicable piece rate.
Also, piece-rate employees get paid extra for breaks and non-productive time.
So they must know their pay for time spent doing things unrelated to their primary duties. Like, the least minimum wage for rest and recovery periods and non-productive time.
It’s up to you to make this obvious on their pay statements.
Keep your payment records
So you can show you’re doing what’s right in court if needed.
A few examples for a few states.
For California, you must keep wage statement records for three years.
However, it’s best to keep them for four. So that you’ll comply with the statute of limitations on state wage claims. Just to be safe.
Also, you must store these in your company location or a central location within the state. And present them within 21 days after a request is made.
New York requires even more years than California for keeping payroll records. For at least six years.
The rest is pretty standard for what information to hold onto: hours worked, rates and commissions. Same for deductions, allowances, and net earnings. See them all here.
Michigan and Arkansas
For Michigan, you just need to keep payment records three years for each employee.
Same for Arkansas.
For whatever state…
Make sure what’s on line matches with what’s on paper. Exactly.
Q: Are you using a 3rd party payroll service?
If so, don’t ignore compliance for any given state.
As you can see, there’s differences.
Work with your vendor to get the format and content just right. Because it’s your responsibility to be compliant.
“Let’s say we’re not compliant…”
“How much might we pay?”
Good for you, for asking. Better to find out sooner than later.
In California, pay an employee an inaccurate amount- and you could be fined up to $4,000- per employee. And it doesn’t stop there.
A single mistake can lead to multiple penalties.
Say, you didn’t provide a worker with a meal break. You would have to pay a penalty to the employee for the missed break. And, perhaps a fine for failing to report the meal-break penalty on the pay statement.
Another twist… you’ll be fined by the paycheck.
Do you pay workers twice a month? Or every week? More paychecks = more fines to pay, if you don’t get it right.
For California and all the other states check with an expert to know the impacts of making payment mistakes.
Why make compliance so difficult
…when CIC Plus makes it so easy?
With CIC Plus you gain
- Flexibility to present pay statements in custom formats as requirement by states.
- Ability to give former workers access to pay statements
- Resources to store pay statement information in a single, safe location
- The options for employees to receive pay information on any device