Pay Stub Law 2019/2020

Federal Payroll Law

What is the Fair Labor Standards Act?

The Fair Labor Standards Act (FLSA) is a federal law which establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in federal, state, and local governments.

When it comes to pay stubs, we’re concerned with the recordkeeping aspect of this Act. Because, while the FLSA requires that employers keep accurate records of hours worked and wages paid, this doesn’t mean employees don’t have a right to see their wages information.

2019 FLSA proposed update

On April 1, 2019, the U.S. Department of Labor announced a proposed rule to revise and clarify the responsibilities of employers and joint employers to employees in joint employer arrangements.

The Fair Labor Standards Act (FLSA) allows joint employer situations where an employer and a joint employer are jointly responsible for the employee’s wages. This proposal would ensure employers and joint employers clearly understand their responsibilities to pay at least the federal minimum wage for all hours worked and overtime for all hours worked over 40 in a workweek.

The Department proposes a clear, four-factor test – based on well-established precedent — that would consider whether the potential joint employer actually exercises the power to:

• hire or fire the employee;
• supervise and control the employee’s work schedules or conditions of employment;
• determine the employee’s rate and method of payment; and
• maintain the employee’s employment records.

The proposal also includes a set of examples for comment that would further help to clarify joint employer status.

As of May 2019, we are still awaiting the outcome of this proposal.

Who is affected by the Fair Labor Standards Act?

The FLSA applies to employers with annual sales equal to $500,000 or more, or who are engaged in interstate commerce. This may sound restrictive, but the FLSA covers almost 90% of US workplaces.

Every employer covered by the FLSA must keep certain records for each non-exempt worker. The Act requires no particular form for the records, but does require that the records include certain identifying information about each employee, as well as data about the hours worked and the wages earned.

The FLSA requires this information to be accurate. Basic records that an employer must maintain include:

1. Employee’s full name and social security number
2. Address, including zip code
3. Birth date, if younger than 19
4. Sex and occupation
5. Time and day of week when employee’s workweek begins
6. Hours worked each day
7. Total hours worked each workweek
8. Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”)
9. Regular hourly pay rate
10. Total daily or weekly straight-time earnings
11. Total overtime earnings for the workweek
12. All additions to or deductions from the employee’s wages
13. Total wages paid each pay period
14. Date of payment and the pay period covered by the payment

How long do employers need to keep employee information?

Under the FLSA, employers need to keep records for at least three years. This includes payroll information, collective bargaining agreements, sales and purchase records. The records may be kept at the place of employment or in a central records office.

Records on which wage calculations are based (time cards, schedules, records of wage additions/deductions) should be retained for two years. These records must be open for inspection by the Department of Labor’s representatives, who may ask the employer to make extensions, computations, or transcriptions.

Cost of Non-Compliance

Consequences for non-compliance vary, depending on local law. But it’s best to avoid a Department of Labor (DOL) audit. For example, in New York, employees who do not receive proper pay stubs can be entitled to recover damages of up to $250 per violation, up to $5,000 per employee.

Even if an employer isn’t required to provide employees with pay stubs, should an employee request access, it’s good practice to allow them to review their records.

Ensuring Payroll Compliance

The best way to ensure country-wide compliance no matter what is to choose a payroll provider that specializes in delivering an effective and accurate service. As a provider of award-winning international payroll, FMP Global is used to navigating the complexities of multiple compliance.

When should I receive my payslip?

In accordance with payslip law, your employer must issue your payslip on or before your payday. Paydays vary by business and by pay run. Some paydays are the same day every month, while others are weekly. If you’re paid every four weeks, your payday will vary every month. You employer’s payroll team should manage this in a way that ensures that your payslips are made available to you on or before each payday.

Should my payslip be paper or electronic?

Under current payslip law, payslips can be provided in traditional hard copy or an electronic copy. In order to streamline their payroll functions and save on paper and ink, more and more people are opting for online payslips.

They also provide extra benefit to employees, because the payslips are safely stored and available at a moment’s notice. Many payroll software packages include an online payslip option as standard that meets all current payroll legislation and is able to be adapted easily to accommodate for future changes.

Can I insist on a paper payslip?

Payslip law states payslips must be provided in either hard copy or electronic copy form – employers are not obligated to produce a paper payslip if electronic ones are given. However, if you are finding accessing an electronic payslip difficult, make your employer aware, as they may be able to print them for you.

My employer refuses to give payslips – what can I do?

If you have received no payslips from your employer, your first step should be to talk to them, asking why you are not receiving your payslips. If after challenging them nothing has changed, you should speak to your local Citizens Advice Bureau for advice on the matter. You may need to raise a grievance or, worst case scenario, take your employer to a tribunal.

What should be on my payslip?

Most importantly, your payslip must show two things:

• your earnings before and after any deductions
• the amount of any deductions that may change each time you’re paid

Changeable deductions are typically tax and National Insurance, but they will vary based on your personal circumstances. Employers must also explain any deductions fixed in amount. You may have pension contributions, a child care subsidy or similar benefit provided by your employer. They can choose to do this either on a payslip, or in a separate written statement.

What deductions can my employer make on my payslip?

Payslip law also refers to situations where deductions are made from pay or you are required to make a payment to the employer. Employers are allowed to make deductions in cases when the deduction is:

• required by law. Such as PAYE tax and National Insurance;
• provided for in the contract of employment;
• part of recovery for an overpayment of wages or expenses;
• arises due to strike action;
• required by a court order;
• made with your written consent.

If you do something that results in your employer suffering a loss, they may be allowed to deduct the loss from your wages. This can include breakages, till discrepancies, or in situations where your employer is providing you with a service. This is most commonly in circumstances where your employer provides you a uniform. In these cases, a deduction or payment by the employee is only allowed within circumstances.

Under payslip law, such deductions can only be made if they are already allowed for in your contract if they are part of a service provided. For unforeseen circumstances, such as damage or breakages, payslip law states that you must have received a full week’s written notice first. Such deductions must be fair and reasonable and not exceed that cost of the loss. Deductions as a result of loss caused must take place within 6 months of said loss occurring.

Failure to pay all or part of the wages due to an employee is considered an unlawful deduction in pay and has reasonable grounds for dispute. Likewise, unpaid notice, holiday pay, bonus and commission payments can also form part of a claim under current legislation.