Companies issue payroll checks as the actual payment or net pay that an employee received from the employer after the completion of a pay period of work. A payroll check is a financial instrument that allows the funds written on the check to be debited from the employers bank account and credited to the employees.
Payroll checks can take several forms; physical check, electronic funds transfer, electronic payroll account or cash. American employment law forbids the payment of employees utilizing goods or other materials.
The amount of the payroll check is also known as the net payment. This amount is equal to the total salary or gross pay, based on the number of hours worked times the hourly rate for the period or the annual salary divided by the number of pay periods in the year. From the gross pay, deductions are taken on behalf of the federal and state government for legislative benefits, such as income tax, FICA, SS, Health Tax and unemployment insurance. Any additional benefits that have deductions are taken from the gross pay each period. The amount remaining is the net pay or payroll check.
Employment law states that employees can only be paid based on a set pay period. The options are daily, weekly, biweekly, fortnightly or monthly. Payroll checks must be issued to employees for work completed during the pay period within a specific time period from the end of the pay period.
Payroll checks must be signed by a duly authorized executive of the company. In the event of a business bankruptcy, payroll checks are protected and must be paid before any other creditors requests are investigated.
Physical payroll checks become stale dated 6 months after the date on the check. If the check is not presented to a financial institution for encashment during this period, the check is no longer valid. A replacement check must requested and issued for the face value of the original check.
Employers issuing payroll checks have a responsibility to provide payment advice with each paycheck. The payment advice must proving the gross payment, all deductions and the name of the benefit the funds are for, the net pay and the payroll period. The advice must be included with all paychecks even if the amount is the same over multiple periods.
The total amount of government deductions must be summarized at the end of every calendar year and a taxation statement issued to every employee by the end of February the following calendar year. The exact form used to report the payroll information varies, depending on the type of income, state and seven other factors.
All amounts deducted from the payroll checks must be remitted to the appropriate agency within a specific time period. Each remittance must include the amount of the employees deduction, employee name, payroll period and the employer names. State and federal deductions have specific remittance deadlines and penalty fees are charged when employers are late with their filing. Any employer who deducts funds from employee payroll checks and fails to remits them is subject to criminal prosecution.