Are your paystubs compliant?
In addition to limiting liability and protecting your operation, it’s also good business to do right by your employees. Most of the information on the wage statement is truly relevant to employees and there’s no reason not to comply.
What is a wage statement?
Better known as a paystub, a wage statement is a document issued by employers to their employees listing all the details of their compensation (wages, benefits, taxes, you name it). If you’re not old enough to remember getting a paper paycheck, you used to tear the check off the wage statement on a perforated line, leaving the stub of the wage statement behind. Ergo, paystub.
Under California law, an employer is required to issue a wage statement either twice monthly, or each time wages are paid. Nearly all employers use 3rd party payroll companies that include or distribute the wage statement every pay period.
Most knowledge/creative workers these days get their wage statements electronically but all California employees retain the right to a printed wage statement if they want one.
Doesn’t the payroll company deal with this? Why do I even care?
One of the first documents we request when onboarding a new client is a recent paystub for each class of employee. I’ve seen payroll stubs from the biggest (ADP, Paychex, etc.) the newest (Gusto, Rippling, etc.) and some that were homemade (yes, some people still calculate their own payroll!). And you know what? Many if not most of them are not fully compliant.
The payroll company issues the payroll that you set up. They do NOT check whether what you’ve set up is compliant. And while some offer “full-service HR” (a term that rarely means full-service), it’s incumbent upon the employer to review the setup with their HR “experts” to make sure it’s compliant. They don’t just catch it.
If you’re reading this, you probably already know that employee liability is one of the top sources of risk for employers in California. You may even have been tempted to buy EPLI (employment practices liability insurance). But did you know that most EPLI policies don’t cover lawsuits brought under PAGA or wage and hour violations? Spoiler alert: the wage statement is a source of liability here too.
By the way, you’re required to keep copies of all those paystubs for 3 years (really 4 if you want to be safe). The payroller may or may not be doing this for you.
So what has to be on it?
Of course there’s a laundry list of items that must be on a wage statement, but the devil is always in the details. If you google it, you’ll get a list more or less like this one (courtesy of SHRM), and these are all important. But they are only what’s required under the Labor Code.
Gross wages earned (which can include just about anything paid to the employee).
The total hours worked by the employee (unless the employee is exempt from overtime).
The number of piece-rate units earned, if applicable.
All deductions made from wages.
Net wages earned.
The pay period beginning and end dates.
The employee's name and only the last four digits of their Social Security number (or an employee identification number other than a Social Security number).
The name and address of the legal entity that is the employer.
All applicable hourly rates in effect during the pay period and the corresponding number of hours the employee worked at each hourly rate.
In addition to these, under California’s paid sick leave law you’re required to show available paid-sick-leave the employee has accrued. This can be shown as PTO if you have a PTO program but nearly every employer in California is required to offer paid sick leave one way or another. Other factors like retirement benefits depend on the type of employee or plan.
I have so many other things to do. Does this really matter?
I get it: there’s so much to do in a mid-market service business, does it really fall on you to make sure the business is totally compliant? And is it really a good use of your time to stay on top of every change to human resources-related civil and case law?
It’s probably not and it’s probably not even practical that you could, with so much changing from year to year and lately from week to week. HR isn’t my primary discipline and I spend 30-40 hours per year on continuing education and monitoring HR news and case law.
Many businesses outsource this type of compliance to a specialist so that in-house HR can focus on growing the business: recruitment, retention, employee relations... all the things that really bring value to the organization. If you’re looking for options to help you stay compliant with state and federal HR regulations while you focus on your team, drop me a line at firstname.lastname@example.org