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Checklist For Final & Unclaimed Paychecks

Managing final paychecks and unclaimed wages can be complicated because final paycheck deadlines, payment methods, wage notices, recordkeeping, and unclaimed-property requirements vary by state. As such, we provide a practical checklist below for managing final paychecks, unclaimed wages, employee notices, recordkeeping, and state reporting requirements.

Why Employers Need a Final Paycheck Process

Final-pay mistakes can create unnecessary wage claims, penalties, interest, administrative costs, and employee disputes.

Therefore, a standardized checklist that gives HR and payroll teams a repeatable process while allowing state-specific requirements should be incorporated into the appropriate steps. This is even more important when an employer operates in multiple states because final-pay and unclaimed-property rules are not uniform nationwide.

As such, please review the state-specific laws for final and unclaimed paychecks. Regardless, please note that state-specific deadlines and requirements should be verified before relying on this checklist for a particular employee or payment.

Final Paycheck Checklist

Before the Employee's Last Day

• Confirm the employee's final date of employment.
• Determine whether the separation is voluntary, involuntary, or due to another reason.
• Identify the applicable state final-pay deadline.
• Calculate all earned wages through the employee's final day.
• Calculate applicable overtime.
• Review commissions, bonuses, and other earned compensation.
• Determine whether accrued vacation, PTO, or other leave must be paid.
• Review applicable employment agreements, collective bargaining agreements, and company policies.
• Identify any lawful deductions or withholdings.
• Check for outstanding wage garnishments or other legally required withholding.
• Confirm the employee's preferred or legally required payment method.

Before Issuing the Final Check

• Verify the employee's legal name and mailing address.
• Confirm hours worked and applicable pay rates.
• Verify overtime calculations.
• Verify commissions and other earned compensation.
• Apply required taxes and withholding.
• Apply only deductions permitted by applicable law.
• Confirm the correct final-pay date.
• Confirm whether the check must be delivered in person, mailed, deposited electronically, or otherwise made available.
• Prepare any required wage statement or pay stub.
• Document the calculation of final wages.

After Issuing the Final Paycheck

• Confirm the paycheck was delivered or deposited.
• Retain proof of payment.
• Document the date and method of delivery.
• Retain the final wage statement.
• Update payroll records.
• Record any amount that remains unpaid.
• Investigate returned checks or rejected electronic payments promptly.

Unclaimed Paycheck Checklist

A paycheck that an employee does not cash does not necessarily mean the employer's obligation has ended. Depending on the jurisdiction, unclaimed wages may eventually become unclaimed property that must be reported and remitted to the state.

Identify Unclaimed Wages

• Identify checks that remain outstanding.
• Confirm the amount owed.
• Confirm the original date of issuance.
• Determine whether the employee has contacted the company.
• Verify the employee's last known address.
• Check whether the employee has provided updated contact information.
• Determine the applicable state unclaimed-property rules.
• Identify the applicable dormancy or escheatment period.
• Determine whether the wages must be reported to a particular state.

Attempt to Locate the Employee

• Send appropriate written notice to the employee.
• Use the employee's last known address.
• Check internal HR and payroll records.
• Review available contact information.
• Document each attempt to locate the employee.
• Retain returned mail and other evidence of unsuccessful contact.
• Follow any state-specific due-diligence requirements.

Report and Remit Unclaimed Wages

• Determine the applicable reporting deadline.
• Prepare the state's unclaimed-property report.
• Verify employee names and addresses.
• Verify outstanding amounts.
• Complete required due-diligence notices.
• Remit funds by the applicable deadline.
• Retain confirmation of the report and payment.
• Update the payroll record to reflect the transfer.

FAQs About Final & Unclaimed Paychecks

What is a final paycheck?

A final paycheck is the payment an employee receives for wages and other compensation earned through the end of employment. Depending on state law and the circumstances of the separation, it may include regular wages, overtime, commissions, bonuses, or accrued vacation or PTO.

When must an employer provide a final paycheck?

The deadline depends on the state and sometimes on whether the employee resigned or was terminated. Employers should check the law of the state governing the employee's employment before determining the final-pay date.

Does an employee have to receive the final paycheck on their last day?

Not necessarily. Some states require immediate payment in certain circumstances, while others allow payment on the next regular payday or establish a different deadline.

Can an employer withhold a final paycheck?

Generally, an employer cannot withhold earned wages simply because an employee owes the company money or has not returned company property. Any deduction from final wages should be reviewed under applicable federal and state law.

Can an employer deduct an employee's debt from a final paycheck?

Only when the deduction is legally permitted. State wage-deduction laws can impose restrictions beyond federal requirements, so employers should verify the applicable state rules before making the deduction.

What happens if an employee does not cash their final paycheck?

An uncashed paycheck may eventually become unclaimed property. The employer generally must follow applicable state procedures for maintaining, reporting, and eventually remitting the funds.

How long should an employer keep an uncashed paycheck?

The applicable period varies by state and by the type of property involved. Employers should track outstanding checks and determine the applicable dormancy or escheatment period rather than automatically voiding an old check.

What should an employer do if a final paycheck is returned as undeliverable?

The employer should document the returned payment, verify the employee's last known address and available contact information, and make reasonable efforts to deliver the wages as required by applicable law.

Does an employer have to contact an employee about an unclaimed paycheck?

State unclaimed-property laws may require due-diligence efforts before property is reported and remitted to the state. The timing and requirements vary by jurisdiction.

When do unclaimed wages become unclaimed property?

The timing depends on the applicable state's unclaimed-property law. Employers should determine when the dormancy period begins, how long it lasts, and whether wages are subject to special rules.

Which state receives unclaimed wages?

The answer can depend on factors such as the employee's last known address, the employer's records, and the applicable state unclaimed-property rules. Multi-state employers should not assume that the state where the employer is headquartered is always the correct state.

What records should employers maintain for final paychecks?

Employers should maintain records supporting the employee's final wages, including hours worked, wage calculations, deductions, payment dates, payment methods, wage statements, and documentation concerning returned or unclaimed payments.

What happens if an employer misses a final-pay deadline?

Depending on the jurisdiction and circumstances, an employer may face wage claims, penalties, interest, damages, or other enforcement consequences. Employers should address missed deadlines promptly.

Are commissions and bonuses included in final pay?

They may be, depending on whether the compensation has been earned under the applicable compensation agreement, policy, and state law. Employers should review the terms governing commissions and bonuses before calculating final wages.

Does unused vacation or PTO have to be paid when an employee leaves?

It depends on the applicable state law and the employer's policies or agreements. Some jurisdictions require payment of certain accrued leave, while others permit employers to establish different rules.

Do wage garnishments continue with a final paycheck?

A garnishment may apply to a final paycheck if the wages are subject to the underlying garnishment order and applicable law. Employers should carefully review the garnishment order and applicable withholding requirements before processing final wages.

Can an employer simply void an old, uncashed paycheck?

Employers should not assume that voiding an old check eliminates the obligation to pay the employee. Depending on the circumstances, the underlying wages may remain owed and may ultimately be subject to unclaimed-property reporting and remittance requirements.

What is the best way for employers to manage final and unclaimed paychecks?

Employers should maintain a written process that covers final-pay deadlines, wage calculations, lawful deductions, payment delivery, returned checks, employee contact efforts, unclaimed-property reporting, and recordkeeping. A state-by-state checklist can help payroll and HR teams manage different requirements.

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