While people may be glad to have work and be getting a paycheck, there is a red flag that should fly high and furiously if seen:
An Indiana employer that does not provide a pay stub or pays wages in cash
Recently, a couple walked into my office to ask a question. Neither they nor the business they mentioned were clients, but they didn’t know where else to turn. You see, they were afraid. Their daughter worked for a local ice cream shop and she was being paid in cash instead of getting a paycheck. They were afraid she would get in trouble with the law for that.
I asked if she was getting a pay stub and the couple said she hadn’t gotten once for several months. This, to me, signaled a huge red flag that often indicates the business is in financial trouble. By law employers in Indiana must issue pay stubs to employees.
The other catch that gets the employee in the future
Some people think, “Great! I’m getting paid without having to report the income and pay taxes.” Well, we all know that is not legal. Not only are your wages not being reported, but chances are very good that the employer is not paying payroll taxes, either. And, if that is the case, it means you are not getting credits for social security (FICA) or Medicare.
Not getting credit for social security and Medicare might not seem like an issue for an employee today, but later in life when these benefits are important, you want them to be there.
When a W-2 is issued to report wages for the year, it will probably not include amounts paid in cash.
Employees have to be aware and prepared
The couple was worried that their daughter would be in trouble and that’s why they stopped by The Payroll Department instead of calling the state to inquire about the issue. I don’t give legal advice, but I do know that there are laws and regulations regarding payroll and payroll taxes that employers (including small business) must follow for every employee in their workplace. It’s not negotiable.
In fact, that is one of the reasons our clients outsource to a payroll provider. Keeping up with tax laws is a task that cannot be ignored and is time consuming. But that’s one of the things we do automatically as a payroll service – because we have to.
Back to the story, the final words in our conversation were about the fact that their daughter should be prepared to look for other employment if she started asking questions. Sad, but true. Payroll and payroll taxes are a part of business and offering jobs, especially for retailers. Employees can feel stuck in the middle, but they have the choice to seek employment elsewhere where they are paid on the up and up and will get proper credit for future benefits.
I am always happy to answer questions for anyone about payroll.
-Teresa Ray, Owner, The Payroll Department