The time requirement for giving a final paycheck to an employee depends on whether the employee quit without notice, quit with at least 72 hours’ notice or was terminated or laid off. State enforcement agencies can penalize employers for not providing an employee with a final paycheck in a timely manner.
1. Review Timecards and Documents
Gather all timecards and documentation regarding the employee’s earned but unpaid wages, and accrued but unused vacation or paid time off (PTO). Notify the person who is responsible for issuing the final paycheck of the time constraints.
2. Calculate Paycheck
Calculate the final paycheck through the final day of work, based on the employee’s:
- Regular rate of pay
- Regular hours worked
- Overtime hours worked
- Earned bonuses or commissions
- Accrued but unused vacation or PTO
Note: If you cannot determine commission wages owed at the time of termination, you must pay the commission owed as soon as the amount is ascertainable and in a manner consistent with your commission pay policy.
Use the Final Paycheck Worksheet when calculating a final paycheck.
3. Make Deductions
After determining the amount due to the employee, make proper calculations for any deductions, including:
- Federal, state and local income taxes
- Social Security
- State unemployment insurance
Note: These deductions can’t include any amount representing the unpaid balance of a debt owed by the employee. In addition, these deductions cannot include the value of any of your property the employee might have, even if the employee doesn’t return the property to you. You can be fined if you do so.
4. Provide the Final Paycheck Within Required Timelines
- If the employee quits with 72 hours’ notice or more (clock hours, not business hours), you must have the final paycheck ready to give to the employee on his/her last day of work.
- If the employee quits with less than 72 hours’ notice (clock hours, not business hours), you must have the final paycheck ready for the employee within 72 hours of when the employee gave notice.
- If you are terminating the employee, you must hand the employee the final paycheck at the moment you inform the employee that he or she is terminated.
5. Document Receipt
Ask employees to sign the Final Paycheck Acknowledgment form to document the fact that they received a final paycheck and that you met the legally required deadline to provide the final paycheck. Use this opportunity to verify that the employee received proper payment.