An Employee’s Final Paycheck and Other Separation Procedures

Final Paycheck

More than 3.5 million Americans quit their jobs every month and, last year, US businesses laid off 21.9 million workers according to the Bureau of Labor Statistics. Whether voluntary or not, terminations are a reality in workplaces today. And when they happen in your organization, it’s important to have procedures in place to ensure compliance.

Here are five key actions to take when things don’t work out.

  • Ensure Proper Recordkeeping: If an employee quits, keep a copy of their letter of resignation. If the employment relationship is ending because you’re terminating an employee, be sure to document the reason and any activities leading up to it in the employee’s file. That way, you’ll have the backup you need in case an employee later makes a claim about unlawful discrimination or otherwise challenges the decision. You’ll also want to maintain copies of certain records even after the employee leaves, like payroll and wage records, benefit elections, and I-9 forms. Find out other actions to take in our termination checklist.
  • Issue Final Paycheck: When it comes to preparing an employee’s final paycheck, familiarize yourself with the rules in your jurisdiction that may dictate how and when it needs to be delivered. Most states specify that an employee be given their final paycheck at the time of termination or very shortly after such as the following payday, but some like Florida don’t have any specific rules. Other states have different timing rules depending on the reason for the employee’s departure. And payment for accrued but unused vacation time or PTO also varies. Read the rules for the Northeast states.
  • Return Property: If you provide employees company property for their use while employed in your organization, like a company credit card, key or access card, badge, mobile phone, or computer equipment, develop a process for tracking what you’ve issued. Then, upon an employee’s termination, prepare a communication that lists the items that need to be returned, how, and by when.
  • Deliver Notices: When an employee leaves, you’ll want to provide them certain notices, some of which are required by law. Typical items in a termination packet include a letter that states the date of termination and details of the final payment, a benefits summary as well as notices of post-termination benefits like continuation of health coverage and 401(k) plan information, and, depending on the circumstances surrounding their departure, information regarding claims for unemployment benefits.
  • Pay Severance: While there is no requirement under the FLSA for severance pay, some companies opt to pay it. If you’re paying severance as a matter of company policy and without a release, it must be paid at the termination meeting. But if the employee must sign a release first in order to receive their severance, you’ll want to hold off paying it until after you receive their signature.

Following these steps will not only make the process simple and seamless for the outgoing employee, but will protect your reputation among remaining employees and the public. For help crafting HR policies for your organization, contact Complete Payroll Solutions at 401-332-9325.

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