Pay stubs vs payroll: what a founder actually needs

Pay stubs and payroll are not the same product. A pay stub is the itemized statement for one paycheck. Payroll is the broader process of calculating what is owed, withholding the right amounts, remitting them to the right agencies, and filing the quarterly and annual returns. Many founders assume they need payroll before they can issue a stub. That is backwards. You can issue a compliant stub today without a payroll service.

SimpleStub generates pay stubs. It does not file taxes, move money, or give tax advice. This guide covers what each service actually does, so you can make a clear decision.

What is a pay stub, exactly?

A pay stub is the itemized record for a single pay period. It shows gross pay, every tax withheld, every deduction, and net pay, along with year-to-date totals for each line. Massachusetts goes further than most states: M.G.L. c. 149, s. 148 requires you to furnish an itemized statement to every employee each pay period. The required fields are employer name, employee name, the day, month, and year of the pay period, hours worked, pay rate, and all deductions.

Federal law (FLSA, 29 CFR 516) only requires you to keep payroll records internally. Massachusetts is the source of the stub mandate.

What is payroll, and what does it cover?

Payroll is a process, not a document. It covers:

• Calculating gross pay from hours or salary
• Computing each tax (federal income, Social Security, Medicare, Massachusetts income, MA PFML)
• Withholding the employee share and tracking the employer share
• Remitting deposits to the IRS (EFTPS) and MassTaxConnect on the required schedule
• Filing quarterly returns (Form 941, MA Form M-941)
• Filing annual returns (Form 940 for FUTA, W-2s by January 31)

A payroll service handles these filings and remittances. A pay stub tool handles the document.

What taxes actually appear on a Massachusetts pay stub?

Social Security and the MA PFML contribution stop accumulating once the employee's year-to-date wages reach the Social Security wage base. The stub must track YTD so those cutoffs apply correctly.

The employer shares of Social Security, Medicare, and MA unemployment (SUI) never appear on the employee stub because the employee never pays them. They belong in your payroll records and filings, not on the document you hand the worker.

Which do you need first?

If you have one employee and a single paycheck to issue, you need a pay stub now and a payroll process before you remit the first withholding deposit. Those are two different deadlines.

The stub is due each pay period. The deposit schedule depends on your total payroll tax liability. New employers typically start on a monthly deposit schedule, but the IRS and Massachusetts assign your schedule based on lookback period liability, so confirm with the relevant agency before your first deposit.

Start with a compliant stub on day one. Get the payroll process, whether in-house or through a service, up before the first deposit is due.

What goes wrong when founders skip the stub?

Massachusetts can assess penalties for failing to furnish itemized pay statements. More practically, employees use stubs to verify their withholdings, apply for housing, and reconcile their W-2 at tax time. A stub that omits a line (say, missing the PFML deduction) or shows round numbers rather than computed amounts creates problems when the employee files and the stub does not match.

The main accuracy rules for a Massachusetts stub:

• FICA wages start with gross pay, then subtract Section 125 cafeteria deductions (health, dental, vision, HSA, FSA, commuter). Traditional 401(k) is not exempt from FICA.
• Federal and Massachusetts income tax wages equal FICA wages minus traditional 401(k) deferrals. Roth 401(k) reduces nothing.
• Never print a full Social Security number; mask to the last four digits. Same for bank account numbers.

What does SimpleStub handle, and what does it not handle?

SimpleStub generates the itemized stub document. It handles the math: gross, each tax line, each deduction, net, and YTD. What it does not do: file Form 941, remit deposits to EFTPS or MassTaxConnect, produce Form 940, or generate W-2s for SSA submission. If you need those, you need a payroll provider or an accountant who files on your behalf.

The two tools are complements. You can use SimpleStub to produce compliant stubs while running deposits and filings yourself, or while you evaluate payroll services. A lot of early-stage founders do exactly that.