All businesses go through employee turnover at one point or another. Employees either voluntarily quit, are laid off or fired, or tragically pass away. In all instances, the business is ultimately responsible for when and how each employee is paid for their time at the firm.
Employees that quit
Employees that voluntarily leave your company are still required to be paid for the services that are rendered. In addition, payment is not necessarily always required to be paid within the normal pay cycle. Certain states such as California require payment within 72 hours from the time the employee announces their resignation from the job. Employers in California that don’t follow these rules may find themselves paying penalties in an amount that assumes the employee is still employed. For instance, the waiting time penalty is an amount equal to the employee’s daily rate of pay for each day the wages remain unpaid, up to a maximum of 30 calendar days.
Did you fire or layoff employees?
Most states require that employers pay employees that are involuntarily terminated as soon as possible. Some states even require that the employer remit payment within the same day. States with this policy include California, Colorado, Illinois, Massachusetts, Missouri and Montana.
What about unused vacation pay?
State rules also vary as it relates to unused vacation pay. Certain states such as California require that employers reimburse employees for unused vacation accruals at termination. Other states (Alaska, Arkansas, Arizona, Connecticut, Delaware, Hawaii, Iowa, Idaho, Kansas, and Kentucky) allow the company to set their own policy as it relates to unused vacation pay.
What if an employee passes away?
This situation isn’t nearly as black and white as is the case if the employee is voluntarily or involuntarily terminated. Many states have specific dollar limits in how much can be paid as per the regular pay cycle even if additional funds are due. For instance, Massachusetts limits payment on behalf of a deceased employee to $100. Please also note that FICA is still supposed to be deducted from payments on behalf of the deceased employee in the current year. However, future calendar year payments are not subject to FICA. In case you’re wondering, the recipient of the payment is usually determined by court order or by state provision.
More questions? Browse answers or ask business questions online.
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Tags: business questions, firing employee questions, small business, Ryan Himmel
