Payroll in the U.S. involves several key elements to ensure compliance with labor laws and proper accounting of wages.
Employee Classification
- Employee vs. Independent Contractor:
Employees receive benefits and protections under the FLSA, while independent contractors handle their own business operations and taxes.
Wages and Salaries
- Hourly vs. Salaried:
- Exempt salaried employees (not eligible for overtime) must earn at least $684 weekly.
- Hourly workers must be paid the federal minimum wage of $7.25 per hour.
- Overtime:
Non-exempt employees are entitled to overtime pay (typically 1.5 times their regular rate) for hours worked beyond 40 hours per week.
Deductions
- Mandatory Deductions:
Federal and state income taxes, Social Security, and Medicare taxes (e.g., FICA contributions).
- Voluntary Deductions:
Benefits such as health insurance and retirement contributions (e.g., 401(k)).
Payroll Processing
- Payroll can be processed weekly, biweekly, semi-monthly, or monthly.
- Employers must adhere to state-specific laws regarding when paychecks must be issued (e.g., weekly or monthly cycles).
Pay Stubs
- Employers are often required to provide employees with pay stubs reflecting gross pay, deductions, and net pay for specific periods.
- Pay stubs can be physical or electronic.
Final Paychecks and Termination
- Final paychecks must be provided promptly, usually on the date of termination.
- Unused vacation and PTO hours must be paid out in compliance with state laws, which vary by jurisdiction.
Conclusion
Employers must comply with both federal and state payroll regulations. At FinStackk, we ensure accurate and timely employee payments, stay compliant and avoid costly penalties.