How and when do you pay an employee’s final paycheck?
You’re Fired!
When you terminate an employee, all wages and accrued vacation (or PTO) earned but unpaid are due and payable immediately. Unless your policy states something different, you don’t need to pay out accrued but unused Paid Sick Leave.
You can not just pay the employee on the next scheduled payday. If you are using a third-party payroll vendor, you need to call them and find out the process to cut a manual check. They should work with you to ensure the appropriate withholdings are calculated, that the vacation/PTO is included and that the check is included in the payroll records.
I quit!
If an employee quits with more than 72-hours notice, follow the same procedure for when you fire someone above. If they quit with less than 72-hours notice, you have 72-hours to get them their final paycheck. Unless you decide to separate them early, then give them their final paycheck on their last day.
Can I hold the check until the employee gives me back (something)?
No. You can’t hold the final check until the employee returns a uniform, laptop, keys, etc. You can’t hold it until they pay you back money that you loaned them. [Note — you also can’t just deduct the amount of the outstanding loan in the final check.]
Where do I pay the employee?
Separated employees must be paid at the place of termination/separation. If you aren’t prepared to deliver the paycheck at the moment you say, “You are terminated,” you must pay the employee up until the date that he/she will actually receive their final pay.
Final Pay Penalties
If you don’t have the check ready with all of the wages included at the time of separation, you can be assessed “waiting time penalties.” This is up to 30 calendar days of a day’s wages for each day that the employee didn’t receive all of their wages due. So, for example, if you paid all their wages but forgot to include their vacation, they are eligible for up to 30 days of pay because they didn’t receive all of their wages due in that final paycheck.
Some employers routinely suspend employees before termination to have time prepare a final paycheck. Unless you are legitimately conducting an investigation, you can be penalized for a willful failure to pay final wages on time.
Expense reimbursements aren’t considered part of the wages and may be included in the next regular payday check. Commissions owed should be paid out based on the written commission agreement.