It’s probably safe to say that nearly all California business owners know the importance of accurately paying their employees – but did you know that failing to provide certain details with those paychecks could mean up to $4,000 in fines per employee? Our state has very specific pay stub requirements, and non-compliance can be an incredibly costly mistake for employers.
Here’s what you need to know to avoid a damaging class-action lawsuit.
What is a Pay Stub?
A pay stub (aka wage statement) is the itemized documentation that accompanies a paycheck. In simple terms, it’s the break-down of how you, the employer, calculated the final amount on the check. Oftentimes, the pay stub is that detachable part of the paycheck that needs to be pulled off before the employee can deposit the check in the bank (although it may be handwritten or electronic).
Why is a Pay Stub Required?
It may seem like the state’s pay stub requirements are nit-picky, but the truth is that they’re generally important and well-intentioned. After all, everyday workers may know what to expect on their paychecks in terms of gross pay – but not after taxes and deductions. So, who’s to say that everything’s been calculated accurately if there aren’t any details?
California’s pay stub requirements are designed to build transparency into the payroll process – so workers know they’re being paid accurately and employers have documentation if a dispute arises.
What Are California’s Pay Stub Requirements?
There are ten specific items that must be provided to employees with each paycheck. The first nine requirements are outlined in California Labor Code Section 226(a), and the tenth is outlined in Labor Code Section 246(h).
- Gross wages earned.
- The total hours worked by the employee (unless the employee is exempt from overtime).
- The number of piece-rate units earned (if the employee is paid on a piece-rate basis), and any applicable piece rate(s).
- All deductions made from wages.
- Net wages earned.
- The pay period beginning and end dates.
- The employee’s name and the last four digits of their Social Security number or their other employee identification 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.
- The amount of paid sick leave available to the employee (listed either on the pay stub or in a separate document provided on the pay date).
It’s important to note that there are also special circumstances, such as for farm labor or temporary services employers, that we’re not discussing in this post but may be applicable to you.
How to Avoid the Most Common Mistakes
First and foremost, being “in-compliance” with California’s pay stub requirements means educating yourself on the laws (which you’ve started to do!) and not using a one-size-fits-all approach if you operate in multiple states. Be aware and deliberate when developing all of your payroll and HR processes.
Second, don’t assume that you’ve done your due diligence simply by hiring a third-party payroll service. Unfortunately, many payroll companies operate nationwide and don’t automatically tailor their services to each state’s requirements. And, you are held liable, whether you’ve hired a third-party or not.
Third, hire an HR Consultant to conduct an HR Assessment that’s designed to uncover any risk exposures you may have (and don’t yet know about). From classifying employees properly to delivering an employee’s final paycheck to responding to personnel records requests – there are endless opportunities for making innocent (but dangerous) mistakes.
Protect the Future of Your Business – Let Us Help You Ensure Regulatory Compliance Today!
Trusted in the community since 2007, California Labor Solutions LLC (CLS) is a specialized HR consulting firm – based out of Orange County, California – that offers comprehensive, personalized, and scalable outsourcing services designed to grow with your evolving needs.
As Founder and CEO of CLS, Shawn Larry takes a solutions-driven approach to human resources – working to inspire confidence in the CEOs and managers who depend on his leadership. In addition to 20+years of experience in the field, Shawn has achieved many credentials and recognitions, including a J.D. from UOP-McGeorge Law School; California Private Investigator License; Certified Mediator; Senior Professional in Human Resources Certification (by HR Certification Institute); and Senior Certified HR Professional (by International Public Management Association).