When do I give an employee’s final paycheck? Learn your state’s rules
Whether an employee quits or is involuntarily terminated, it can be a challenging time for a number of reasons. Depending on the circumstances, emotions may run high. You may be worried about the impact of the employee’s departure. Plus, there are lots of details to keep track of to make sure you comply with any legal requirements. One of these is to give your worker their last paycheck. But just when exactly?
While most states have laws about the final paycheck, not all do, especially in parts of the country where there’s less employment regulation like the southeast. Since most of our clients are in the Northeast, we’re specialists in the laws in the area and have included a summary of the requirements below. For other parts of the country, you can check to see if your state regulates the final paycheck by searching your local Department of Labor website. The US DOL has a list of the state websites to make them easier to access.
At Complete Payroll Solutions, our HR team helps thousands of clients understand their responsibilities for all stages of the employment relationship, from hiring to termination. One of the most common questions we get asked when employees leave is when and how to give them their final paycheck. Since the rules vary according to where you’re located, here we break down final paycheck guidelines state by state in the Northeast so you know exactly what you need to do — and when — to reduce your risk of a complaint.
Federal Vs State Paycheck Requirements
On a federal level, there is no law or regulation that requires you to give former employees their final paycheck immediately – even though employees may want it. Under the Fair Labor Standards Act (FLSA), employers can issue the final paycheck at the next regular payroll. Your next payroll depends on your pay frequency, meaning whether your company pays employees weekly, biweekly and so on.
But states can set their own rules and there are generally two approaches they take to the final paycheck: provide it immediately or with the next pay period. And when states require that you pay sooner than the FLSA, you need to follow state law.
Likewise, the FLSA is silent on whether unused benefits should be included in the final paycheck but states may specify what needs to be added. So you’ll want to review things like unused benefits, the manner of payment like direct deposit or mail, and whether you can deduct negative vacation time to confirm all the details to get the last paycheck right.
In states that don’t have laws about the final paycheck, like Florida, you’ll want to make sure you have a policy about how you treat the last wages. And be sure to follow it. Let’s say you decide that your protocol will be to issue all final paychecks on the next pay period or that accrued vacation time won’t be paid out in the final paycheck. Those policies should be documented in writing and shared with all employees in your handbook so expectations are clear.
Final Paycheck Requirements In The Northeast States
It’s important to familiarize yourself with the laws in the states where you operate so you remain in compliance. Since most of our clients are located in the Northeast, we’re including a round-up below of the requirements in the area.
- Connecticut: In Connecticut, the requirements for the final paycheck differ depending on whether the employee quits or is involuntarily terminated. If they quit, it’s due no later than the next regular payday, either through regular payment channels or by mail. When an employee is let go, the final paycheck is due no later than the business day following the day of discharge. Accrued fringe benefits must also be paid upon termination if an employer policy or collective bargaining agreement provides for the payment.
- Maine: You must pay an employee who quits or is let go no later than their next established payday. When you have a mass layoff, if you’re a covered establishment, you’re liable for severance pay to eligible employees at the rate of one week’s pay for each year, and partial pay for any partial year, from the last full month of employment by the employee. That severance is in addition to any final wage payment and must be paid within one regular pay period after their last full day of work. When it comes to unused benefits upon termination, whenever the terms of employment include provisions for paid vacations, vacation pay has the same status as wages earned and must be paid on either the next regular payday or within two weeks of an employee’s demand, whichever is earlier.
- Massachusetts: When an employee quits in Massachusetts, you need to pay their final paycheck on the next regular payday or, in the absence of a regular payday, on the following Saturday. When an employee is involuntarily terminated, you generally need to give them their final paycheck the day of discharge. In Boston, the final paycheck is due as soon as the employer complies with the laws requiring certification of payrolls, bills, and accounts. In Massachusetts, vacation and holiday payments are also considered wages so you’ll need to provide payment for these hours earned under an oral or written agreement. However, payment for accrued, unused sick time doesn’t count as “wages” in the state.
- New Hampshire: As an employer, you need to provide a final paycheck to an employee who quits no later than the next regular payday – except if they give at least one pay period’s notice, you have to pay all wages earned within 72 hours. When an employee is involuntarily terminated, the final paycheck is generally due within 72 hours of the time of termination. If an employee is laid off, the final paycheck must be paid by the next regular payday. Vacation pay, severance pay, personal days, holiday pay, sick pay, and payment of employee expenses, when these benefits are a matter of employment practice or policy are considered wages, when due. Employers are generally prohibited from withholding any portion of wages unless (among other reasons) the employee made a written request that authorizes the employer to deduct from final wages any amount owed for voluntary payments for vacation pay, paid time off pay, earned time pay, personal time pay, annual pay, sick pay, sick dependent pay, and bereavement pay made under a written employment policy when such payments have been requested and paid to the employee in advance of eligibility.
- New York: In New York, no matter the circumstances, you’ll need to give employees their final paycheck by the next regular payday. And the wages must be mailed if your employee requests. When it comes to unused benefits, payment of these depends on the company’s vacation or resignation policy. The courts have held that an agreement to give benefits or vacation days can specify that employees lose accrued benefits under certain conditions. But to be valid, the employer must have told employees, in writing, of the conditions that nullify the benefit.
- Rhode Island: When an employee quits, you’ll need to get them the final paycheck on the next regular payday. When you involuntarily terminate them, the final paycheck is also generally due on the next regular payday unless the termination is due to a liquidation of the business, merger, disposition of the business or removing the business out of state, when wages are due and payable with 24 hours of separation. For any employee who has completed a least a year of service, you’ll need to pay out any vacation, holiday pay and insurance benefits accrued or awarded by collective bargaining, company policy or other agreement with the other wages due.
- Vermont: When your employee quits, you’ll need to give them their final paycheck on the last regular payday or, if there’s no regular payday, on the following Friday. When they are involuntarily terminated, it’s due within 72 hours of discharge. If you are a party to a written agreement – even a handbook – that provides for vacation time, sick leave, holidays and/or severance pay, you’re liable to employees for these benefits as well in the final paycheck.
How To Avoid Final Paycheck Problems
What happens if you don’t give an employee their final paycheck on time? The employee can contact the Department of Labor’s Wage and Hour Division of the state labor department to file a claim. If that happens, you risk having to pay the correct wages and a fine on top of that. But that’s not the only potential downside. If an employee complains, the Department of Labor will investigate or even audit the company. And when they do, you could face a much bigger problem since they’ll likely discover other wage and hour or I-9 issues.
The best practice is to follow state law and/or your own policy. Beyond compliance, be sure you make an employee’s departure from the company as smooth as possible. This helps protect your company from complaints, lawsuits or even violence. Have a protocol in place like a termination checklist that includes providing a letter outlining when employees will get their last paycheck, what happens with unused vacation time, how they’ll find out about COBRA, and so on. Making things as clear as possible can help keep terminated workers calm and less likely to retaliate.
Stay Compliant With Final Paycheck Rules
When an employee leaves, you have a lot on your plate. And one of the most important items to get right is the final paycheck. Properly administering final wages can not only keep you compliant with laws and regulations but can help unwanted action or attention that can lead to even bigger problems. If you have an employee leaving your company, our solutions allow you to simply enter the termination date and reason, and payment will be automatically generated in compliance with state law. To learn more about how to handle the final paycheck, read our blog on separation procedures.