How do paystub generators comply with U.S. regulations?
Online pay stub generators can simplify your payroll process and be additional automation in your payroll software
A pay stub generator is a type of software that generates pay stubs on behalf of an individual or business. These programs are intended to simplify the process of generating pay stubs by automating the calculations.
People have a variety of reasons for needing a pay stub. Whether it’s to apply for a job, file taxes, or just because you need a copy of your paycheck to keep on hand for any eventuality, it can be handy to have one available.
You may also want to check that the pay stub generator you are using is legal and in accordance with U.S. regulations.
Here are some ways to discover whether the pay stub generator you are using is compliant with U.S. regulations.
Overview of FLSA Standards for Payroll
The Fair Labor Standards Act (FLSA) regulates the pay of employees in the United States. The FLSA is the law that establishes the federal minimum wage and the overtime exemption for employees.
The law also establishes minimum standards for employers regarding payroll. One of the most important sections of the law is the federal minimum wage. For most pay stub generators, such as ThePayStubs and others you may find online, it is very important to be in compliance with the requirements of the FLSA.
Federal guidelines on the FLSA say that pay stubs must contain certain information for each pay period. Employers have to include the following information in each pay stub:
- Employee name
- Pay rate
- Period of pay
- Deductions and withholdings
However, there are other things to be aware of when using a pay stub generator, and payroll software in general. While many payroll software companies claim to be FLSA-compliant, it is often minimum compliance and is based upon private sector compliance, even though the software offered may be for the public sector.
As an example, a payroll system may claim to automatically calculate overtime based on a seven-day workweek, but it may not accurately calculate for employees on an alternative workweek schedule. Some payroll software systems allow you to upload your own data to calculate overtime, so you have more control.
How you can ensure your payroll software gives you compliant pay stubs
Your payroll software and pay stub generator must take the following into account, in order to ensure maximum compliance:
Most pay stub generators use a 7/60 workweek for the calculations, which is a shortened standard business week used in the private sector and included in the FLSA. However, employees in the public sector may work an alternative workweek schedule, such as a 4/4, which is half a standard workweek.
While a typical standard workweek schedule for government employees is 5/5, many workers may work a 4/4, which is a half-standard workweek schedule. If you work an alternative workweek schedule, a 9/80 standard workweek calculation is not accurate and you may end up in violation of the FLSA.
Must be able to split hours worked in a day into separate workweeks
Because the FLSA designates 9/80 workweeks as acceptable, you should also be able to split an employee’s time worked in a day into separate workweeks. For example, if an employee comes in an hour early for an 8-hour shift on a split-day during their 9/80 work week, that will incur 1 hour of FLSA overtime.
Thus, the payroll software must be able to accommodate the splitting of the workday into multiple workweeks. A mandatory split-shift has to be designed for employees to complete their assigned shifts and hours of work on a 9/80 workweek.
Fraudulent use of pay stub generators
Unrelated to FLSA regulations, but notable is the potential for fraud abuse of pay stub generators. For example, someone who wants to acquire a payday loan and needs to show proof of income to satisfy the requirement of the loan may create a fraudulent pay stub using an incorrect pay rate.
Because pay stub generators are easily available to use online, someone could create a fraudulent pay stub and use it to go through the lending process. The loan officer could potentially be unaware of the false information on the pay stub, and would approve the loan.
Using a pay stub generator to falsify loan documentation could lead to severe criminal penalties, whether or not the person is actually employed. However, those that create fraudulent pay stubs will do so knowing that they have an avenue to produce valid pay stubs, which makes it an easy task to execute.
In 2015, a North Carolina woman was sentenced to 60 months in prison for providing false information on loan documents. So while it may be tempting to just generate fake pay stubs for financial gain, there are harsh penalties associated with it. The IRS especially frowns upon those who commit the crime of making false returns and creating fraudulent bank records.
Online pay stub generators can simplify your payroll process and be additional automation in your payroll software, but you should be sure that the information you are recording is FLSA compliant.
Furthermore, you should never use a pay stub generator to falsify information on loan documents, which is one of the types of fraud the IRS is looking for.