Employee terminations can often be difficult situations, so it is best not to make it any worse that it needs to be.  All states have payroll laws regarding an employee’s final paycheck laws that must be complied with whenever an employee leaves.  Unfortunately, these laws vary by state and there are often penalties for violating these laws; not to mention if a former employee sues, you could be required to pay for their attorney’s fees as well as court costs.

There are a number of states that require employers to give a departing employee his or her final paycheck in a rather short amount of time.  In other states, the time limit depends on whether the employee voluntarily quit or was terminated by the company.

Some helpful guidelines to help you avoid penalties:

• Calculate what needs to be paid. This may include hours worked but not yet paid, accrued but unused vacation time, accrued but unused personal time, earned but unpaid commissions, earned but unpaid bonuses and possibly stocks.  You should consult with your employee handbook for your company policy on any of the aforementioned – in particular payout for vacation and personal time.                                                    
• If the employee is terminated, they should normally be given their final pay on their way out the door – but not later than 24 hours beyond that.
• If the employee resigns, in some states their final pay may be processed with the next regular payroll, but others still require it to be paid within one business day of their last day worked.  You should check with the Department of Labor in your state to confirm the timeframe.
• Do not use the final paycheck to collect monies owed by the employee to the company.  Most states have laws prohibiting a company from making these types of deductions from pay checks, while others may allow you to do this, but only with a signed written agreement with the employee.  You have rights, but this is not the best place to settle those claims.

Parting may or may not be sweet sorrow, but separations can be stressful for everyone involved. Use checklists, plan ahead and lose the emotion.  Make the tough decisions but execute the termination with professionalism and respect. 

Payroll and other labor laws can be confusing and can differ significantly from state to state, which is a time consuming burden for small businesses to stay on top of.  Since 1988, Total Team Solutions has been providing our clients with cost effective employee benefits, payroll and human resource advisory services that save them time and money, while eliminating the stress.  If interested in learning how Total Team Solutions could benefit your company, please contact John Morlock at jmorlock@ttspro.com or call him at 1-800-836-9678, extension 5.

ABOUT TOTAL TEAM SOLUTIONS:  Total Team Solutions is a full service Human Resources Outsourcing company helping small business manage their payroll, employee benefits and human resources needs to reduce expenses and save them time so they can focus on running and growing their businesses.  Based in Trumbull, CT, Total Team Solutions serves clients in Connecticut, Massachusetts, New York and New Jersey.