Pay Stubs for Small Businesses: What to Include, What to Keep

If you run a small business with employees, pay stubs and payroll records are part of paying people correctly. This guide covers what to put on a stub, what federal law requires you to keep, and for how long. State rules can add to these, so treat this as a starting point.

Are pay stubs required?

At the federal level, the Fair Labor Standards Act (FLSA) does not require employers to give employees pay stubs. It does require employers to keep accurate records of hours worked and wages paid. Many states, however, do require employers to give employees a written or electronic wage statement each payday, often with specific items listed. Check your state labor department's requirements. Even where not required, a clear stub helps employees understand their pay and reduces questions.

What to include on a pay stub

A complete stub usually shows:

• Employer information: business name and address, and in some states the employer's identification number.
• Employee information: name and an identifier such as an employee ID or the last four digits of the Social Security number. Avoid printing the full number.
• Pay period start and end dates, and the pay date.
• Earnings: hours worked and rate for hourly staff (regular and overtime separately), or the salary amount for the period; bonuses, commissions and other pay types.
• Gross pay.
• Taxes withheld: federal income tax, Social Security, Medicare, and any state or local taxes.
• Deductions: each one listed separately, marked pre-tax or after-tax.
• Net pay and how it was paid.
• Year-to-date totals for each line.

For what each section means to the reader, see how to read a pay stub.

Payroll records federal law requires

Department of Labor (FLSA)

According to the Department of Labor's Fact Sheet #21, employers must keep records for non-exempt employees that include, among other things, the employee's full name and Social Security number, address, hours worked each day and total hours each workweek, the basis of pay, the regular hourly rate, straight-time and overtime earnings, additions to and deductions from wages, total wages paid each period, and the pay date and pay period covered.

IRS employment tax records

The IRS expects employers to keep records supporting employment taxes, such as amounts and dates of wage payments, employee names, addresses and Social Security numbers, copies of Forms W-4, dates of employment, and copies of filed returns and deposit records. See IRS: Employment tax recordkeeping.

How long to keep payroll records

• IRS: keep employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later.
• FLSA payroll records: keep for at least 3 years.
• FLSA supporting records on which wage computations are based, such as time cards, wage rate tables, work schedules and records of additions to or deductions from wages: keep for at least 2 years.

States may require longer periods, and insurers, lenders or other laws may too. Many businesses simply keep payroll records for the longest period that applies to them. When in doubt, ask an accountant or employment attorney.

Paying yourself as the owner

How an owner is paid depends on how the business is set up for tax purposes. Sole proprietors and partners generally are not employees of their own business and take draws rather than wages, so they do not receive W-2 pay stubs from it. Owners who work in a business taxed as an S corporation or C corporation are generally employees and receive wages through payroll with withholding. The rules here have real consequences, so confirm your setup with a tax professional. If you are self-employed, see pay records for contractors and the self-employed.

Practical tips for small employers

1. Get a W-4 from every employee at hire. See how federal withholding works.
2. Classify workers correctly. Employee vs contractor, and exempt vs non-exempt, both change what you owe.
3. Pick a pay frequency and stick to it. See pay frequency compared and check your state's minimum.
4. Track year-to-date totals. They drive the Social Security wage base, additional Medicare withholding and the year-end W-2. See YTD totals explained.
5. Make each stub match the payment. The amount, date and deductions on the stub should reflect the paycheck actually issued.
6. Store records securely. Payroll records contain Social Security numbers; limit who can access them.

Creating stubs for your team

PayStubNest lets you create pay stubs with your business logo and a choice of templates, enter hours or salary, and let the calculator apply federal and state withholding and carry YTD totals across a series. Previews are free; you pay per download or by subscription. Details are in the FAQ. Pay stubs support your records; they do not replace your payroll tax filings and deposits.