Final Wages

When an employment relationship is terminated, getting a final paycheck to the employee promptly is important. The former employee will want what is owed to him or her, and you want to avoid the penalties that many states impose for failure to pay final wages in a timely manner.

When preparing an employee’s final check, take all appropriate deductions and reduce the pay of hourly employees by the amount of time not worked in that pay period. Make sure that you don't deduct premiums for benefits if premiums are paid in advance. If the employee wants to continue health benefits, he or she can do so under COBRA.

Most states have laws that regulate when final wages must be paid to former employees. In general, employees who are fired must be paid at the time of discharge, or very soon thereafter. Employees who quit generally must be paid at or before the next regular payday for the period in which the termination occurred. However, some states require employers to pay within a shorter period if the employee provides adequate notice that he or she is leaving.

Employees who are laid off, locked out, on strike, or engaged in a labor dispute are usually subject to the same rules as those who quit. The rules vary slightly from state to state, but, as an employer, you should know that you might have to cut a final payroll check on relatively short notice. This can involve working out accrued vacation and making a number of other adjustments.

In addition, some states provide specific penalties for those employers that fail to pay final wages in a timely manner. These penalties frequently involve continuation of wages for some specified period or a monetary penalty. Employees may also bring suit if they feel that your actions with respect to final wages are unreasonable.