There can be many questions that come to mind when you find out that an employee is leaving your company. One responsibility is ensuring that the individual receives their final paycheck according to state and federal law. These laws tell employers when final pay must be provided to the individual, what the pay must include as well as where it must be delivered.
If you are battling with this issue in your current business, read below to find answers to frequently asked questions regarding the final paycheck that must be provided.
When is final pay due to employees? According to federal law, the check is due by the next regular payday, however, it is important to note that some states require it sooner. With this in mind, you should look into your state guidelines for more details.
In most cases, the time frame of the check depends on whether the separation was voluntary or involuntary. For example, in the state of California it is required that pay be provided immediately if the employer initiated the termination. If the employee decides to part ways with the company without notice, final pay is due within 72 hours. If given at least 3 days’ notice, final pay is due on the individual’s last day of employment.
In Texas, involuntary terminations require pay to be provided within 6 days of termination. If an employee decides to resign, then they must be paid in full by the next regularly scheduled payday.
Am I responsible for paying employees for unused vacation time when they leave? This is another common question that crosses many employers’ minds. Unfortunately, the answer is dependent on your state and company policy. States generally handle unused paid time off in one of the following three ways:
- Employers are responsible for paying staff for accrued, unused vacation time at the date of termination.
- Employers are allowed to exclude unused vacation time from final pay only if they have a written policy that states they will not be paid for any accrued, unused time upon separation.
- Employers can exclude accrued, unused vacation from final pay absent a policy that says otherwise.
Be sure to check with your state law to determine which of these three will apply to your company. Failing to pay accrued vacation when mandated by state law can be costly.
Do I need to pay staff for unused sick time at time of termination? A majority of sick leave laws do not require that you pay staff for accrued, unused sick time. However, it is important to note that if you bundle sick leave with vacation time, your state may apply the same rules as it does for vacation.
If an employee quits then fails to return a company computer, am I allowed to withhold their final paycheck? Unfortunately, employers are not allowed to withhold final pay for this reason. You must meet final pay deadlines per state and federal law even if staff haven’t returned your property in a timely manner.
If an employee doesn’t return company property, can I make a deduction from the employee’s final check to help pay for the unreturned equipment? The Federal Fair Standards Labor Act (FLSA) will not permit this type of deduction from exempt employee’s pay. However, if the individual is a non-exempt employee, then the FLSA will allow employers to make deductions from employee’s pay for stolen, lost, or unreturned equipment. Please note that deduction cannot reduce the individual’s pay below minimum wage and should not cut into any overtime pay. Once again, be sure to check your state law as some states prohibit this practice.
If an exempt employee typically works Monday through Friday and then chooses to leave mid-week, am I responsible for paying their full salary? The FLSA requires companies to pay exempt staff their full salary for normal workweeks in which they perform work. However, if they do not work a full workweek in their first or last week of employment, then you are allowed to prorate the staff member’s salary for that week.
As an employer, it is crucial that you follow applicable laws regarding final pay to avoid fines for failing to remit all compensation timely. To help protect yourself and business, begin by developing policies and procedures to make sure that you are staying compliant.
If you have any additional questions regarding the final paycheck, please contact a human resources specialist or employment attorney to guide you through your state’s requirements.
