A paycheck is a check issued by an employer in order to satisfy the compensation commitment the employer has with the employee. The paycheck is most frequently issued every two weeks, weekly or monthly. Employees generally receive 26 paychecks a year with the compensation paid in equal installments.
Organizations usually require employees to turn in time cards to assist payroll accounting to track employees' time. Exempt employees turn in 40 hours less any paid time off. Non-exempt employees, often asked to punch a time clock, turn in the exact hours worked so overtime is fairly paid according to the FLSA.
In issuing the paycheck to an employee, the employer is legally required to withhold a certain percentage of the compensation to pay income tax and social security. The employer regularly sends the dollars withheld, and additional social security paid by the employer, to the I.R.S.
The employer may withhold additional amounts of money from the paycheck when the employee is required to pay for a portion of the benefits plan such as part of the cost of health insurance. Additionally, employers must withhold wages to comply with wage garnishment ordered by a court to pay an employee’s unpaid debts such as alimony and child support.
Many employers use the paycheck as a communication tool. The paycheck stub often tells the employee how much vacation time, sick time, or paid time off (PTO) was accrued during that pay period. The paycheck may offer a cumulative accounting of time off used by the employee.
Since the employee generally receives his or her paycheck in an envelope, reminders, updates, and newsletters can be inserted.
Many organizations use a third party vendor, such as ADP, to process employee paychecks. The third party processor is an expert at producing paychecks.