Updates by Month

HR Services

  • Cool HR Software Discover Business showcases some amazing HR software for the beginner.

Insurance Brokers

Networking Websites

Payroll Websites

  • Human Resources, Payroll Comments Off on Final Pay Rules

    When an employee leaves your company, you have a responsibility to ensure that he or she receives their final pay in accordance with federal and state law. Generally, these laws dictate when you must provide the employee with their final pay and what the pay must include. Here we provide answers to frequently asked questions about final pay.
    Q: When is final pay due?

    A: Under federal law, final pay is generally due by the next regular payday, but many states require final pay sooner. In some cases, this time frame differs depending on whether the employee initiates separation (voluntary termination) or the employer initiates separation (involuntary termination). For example, California requires final pay immediately for involuntary terminations. For voluntary terminations, the state requires final pay within 72 hours. However, if the employee provides at least 72 hours of notice, final pay is due on the employee’s last day. Note: Some states have separate final pay deadlines and other rules for commissions, bonuses, and other special situations.

    Q: Do I have to pay employees for unused vacation when they leave?

    A: It depends on your state and company policy. States generally handle unused vacation and paid time off in one of three ways:

    Employers must pay employees for accrued, unused vacation time at the time of separation;
    Employers can exclude unused vacation time from final pay only if they have a written policy that explicitly states that employees will not be paid for any accrued, unused time upon separation; or
    Employers can exclude accrued, unused vacation from final pay absent a policy that says otherwise.
    Q: Do I have to pay employees for unused sick leave at the time of termination?

    A: Most sick leave laws don’t require employers to pay employees for accrued, unused sick leave at the time of separation. However, if you bundle all leave, including sick leave, into a single paid-time-off (PTO) policy, your state may apply the same rules as it does for accrued, unused vacation/PTO (which could require payout upon separation). Check your state law to ensure compliance.

    Q: An employee quit and has failed to return a company computer. Can I withhold his final paycheck until he returns it?

    A: As a general rule, you may not withhold final pay until an employee returns company equipment. You must meet the applicable final pay deadline even if the employee hasn’t returned company property.

    Q: Instead of withholding the entire paycheck, can I make a deduction from the employee’s final check to help pay for unreturned equipment?

    A: The federal Fair Standards Labor Act (FLSA) does not permit this type of deduction from exempt employees’ pay. For non-exempt employees (those entitled to the minimum wage and overtime), the FLSA permits employers to make deductions from employees’ pay for lost/stolen/unreturned equipment provided it does not reduce the employee’s pay below the minimum wage and does not cut into any overtime pay. Some states prohibit this practice or have additional requirements, so check your state law before making a deduction.

    Note: Under the FLSA, employers are generally required to obtain an employee’s consent before making a permissible deduction. The agreement must specify the particular items for which deductions will be made (e.g. company uniforms, equipment, or employee theft) and how the amount of the deduction will be determined. It is a best practice to obtain the employee’s authorization in writing and consult legal counsel before making a deduction.

    Q: An exempt employee who typically works Monday through Friday resigned. Her last day is Wednesday. Do I have to pay her full salary for that final week even though she will only work part of it?

    A: Apart from a few narrow exceptions, the FLSA requires employers to pay exempt employees their full salary for any workweek in which they perform work. However, if an exempt employee doesn’t work a full workweek in their first or last week on the job, you may prorate the employee’s salary for that workweek so that it only covers the days worked.


    Failure to provide final pay in accordance with applicable laws may result in fines. Develop policies and procedures to ensure compliance.

  • Employers often wonder what they can deduct from an employee’s pay if the employee has damaged company property or stolen it. Both the Fair Labor Standards Act (FLSA) in conjunction with state laws govern what can and cannot be deducted from employee wages.

    FLSA rules are as follows:

    Non-Exempt Employees:

    Non-exempt (also known as “hourly”) employees are entitled to a minimum wage per hour and must be paid for all hours worked. Overtime is due (under federal law) when an employee works more than 40 hours per week.


    In limited circumstances, employers can make certain deductions to non-exempt employees’ wages. However, several types of deductions are prohibited if the deduction reduces the employee’s pay below the minimum wage or cuts into their overtime pay. This is true even if you sustain an economic loss due to an employee’s negligence.

    Items for which deductions may not reduce a non-exempt employee’s pay below the minimum wage or cut into his or her overtime pay include (but are not limited to):

    • Cash shortages;
    • Tools used in the employee’s work;
    • Employer-required uniforms;
    • Damages to company property by the employee or any other individuals;
    • Financial losses due to clients/customers not paying bills; and
    • Theft of company property by employees or any other individuals.

    Accordingly, under federal law, you may make deductions to non-exempt employees’ wages for the above-mentioned reasons only if it does not reduce pay below the highest applicable minimum wage (federal, state, or local). If a non-exempt employee works overtime, deductions are limited to the amount that could be deducted if the employee had only worked a 40-hour week.


    If an employee is paid $7.40 per hour (and the applicable minimum wage is $7.25 per hour) and works 45 hours in the workweek, $6.00 is the maximum amount you may deduct from his wages (for permissible reasons only) in order to satisfy the minimum wage and overtime requirements of the FLSA ($7.40 – $7.25 = $.15; $.15 x 40 hours = $6.00).

    If the same employee works 30 hours in the workweek, $4.50 is the maximum amount you may deduct from the employee’s wages ($.15 x 30 hours). However, if he works in a state where the minimum wage is $7.40 per hour, you would be prohibited from making any deduction under federal law.

    Exempt Employees:

    Exempt employees must receive their full salary in any workweek in which they perform any work, regardless of the number of hours worked. Deductions from an exempt employee’s pay are permitted only in a few limited circumstances:

    •  When an employee is absent for one or more full days for personal reasons other than sickness or disability;
    • To offset jury or witness fees, or for temporary military duty pay;
    • For penalties imposed in good faith for infractions of safety rules of major significance;
    • For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct infractions;
    • In the employee’s first or last week of employment if the employee does not work the full week; or
    • For unpaid leave taken by the employee under the Family and Medical Leave Act.

    Deductions from exempt employees’ salary for any other reason–including theft/loss of or damage to company property–are not permitted by the FLSA.

    Employers should carefully review federal and state laws to determine the types of deductions that are permitted for non-exempt employees. A written policy should be drafted in accordance with these laws.

    Under the FLSA, employers are generally required to obtain an employee’s consent before they subject the employee to a permissible deduction. The agreement must be specific concerning the particular items for which deductions will be made (e.g., company uniforms, equipment, or employee theft), and the employee must know how the amount of the deductions will be determined. While this may be done verbally, it’s recommended that you obtain written acknowledgment. Note: generally speaking when making deductions for losses or damages, the employer bears the burden of proof.

    IMPORTANT: Your state law may limit your ability to deduct for the above-mentioned items, even with a written agreement between you and the employee and even if doing so does not bring the employee’s pay below the minimum wage. Check your state law and consult with legal counsel to ensure compliance.



Recent Comments

  • Glad you enjoyed the read! And thanks for the compliment! ...
  • Hi, Randy. Thanks for the offer, but I don't think that I a...
  • Hi My name is Randy Price and i am emailing you today ...
  • That really caruepts the spirit of it. Thanks for posting.
  • Very well written information. It will be helpful to everyon...