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One of an employer's most important responsibilities is ensuring that employees are paid in accordance with federal, state, and local wage payment laws. Among other things, these laws cover how employees may be paid (e.g., cash, paycheck, direct deposit, payroll debit card, etc.), how frequently they must be paid, and the deadlines for providing departing employees with their final pay. Below are some of the most frequently asked questions regarding wage payment. Q: How often must I pay employees? A: Federal law doesn't regulate how often you must pay employees, but several states do. In some states, employers must pay employees weekly or at least twice every month, although other states permit employers to pay employees less frequently. See the Wage Payment: Frequency and Timing section of HR411's State and Federal Compliance Database for more information on state requirements. Regardless of the frequency in which employees must be paid, it is important to establish regular paydays in advance and clearly communicate them to your employees. Q: Can I require employees to receive their pay via direct deposit? A: It depends on the state in which you operate. Many states prohibit employers from forcing employees to receive their pay through alternative means (e.g., direct deposit or payroll debit card). In these states, employees must voluntarily authorize direct deposit or other form of alternative payment. In the absence of state restrictions, federal law permits employers to require employees to receive their pay via direct deposit as long as the employee is free to choose the financial institution to which the funds will be deposited. It is a best practice to obtain and retain written authorization for direct deposit that includes designation of the employee’s financial institution of choice. See the Wage Payment: Direct Deposit section of HR411's State & Federal Compliance Database for more information on state requirements. Q: When should I pay my employees if a payday falls on a holiday? A: If a scheduled payday falls on a holiday, some states require payment on the preceding business day. Absent such a requirement, employers generally have the option of paying employees on the day before or after the holiday. Before the start of the calendar year, employers should establish their paydays for the year taking into account their holiday schedule. Q: An employee is absent on a payday and wants me to give his paycheck to a friend. Is this allowed? A: Generally, there is no law prohibiting this, but it is not considered a best practice. If you decide to allow another individual to pick up an employee's paycheck, it is important to first obtain the employee's written permission and then have the person picking up the paycheck sign a receipt. Q: A non-exempt employee forgot to record her hours on her timesheet. Am I required to pay her? A: Yes, under the Fair Labor Standards Act (FLSA) and many state laws, an employer must pay the employee for all hours worked on the next regularly scheduled payday, regardless of whether the employee adhered to the company's timekeeping procedures. If an employee fails to submit or sign a timesheet, ask the employee and his or her supervisor to immediately provide you with the hours worked and make sure the employee is paid accordingly. Q: How long do I have to provide a departing employee with his or her final paycheck? A: Under federal law, a departing employee's final paycheck must generally be provided by the next regular payday, but many states have implemented shorter timeframes for providing final pay. At the state level, final pay deadlines generally depend on whether the employee initiates the separation or the employer does. Example: California requires that an involuntarily terminated employee's final pay be provided at the time of termination. If an employee resigns and gives less than 72 hours of notice, the employee's final pay must be provided within 72 hours of leaving. If the employee gives at least 72 hours of notice that he or she is resigning, final pay is due on the employee's last day. See the Wage Payment: Final Payment section of HR411's State & Federal Compliance Database for more information on state requirements. Q: Do I have to include employees' unused vacation in their final paycheck? A: Generally, federal law does not require employers to pay separating employees for accrued but unused paid time off. However, many states regulate vacation payouts. State laws generally address the issue in one of the following ways:
Q: An employee resigned and hasn't returned company equipment. Can I deduct the cost from their final paycheck? A: This is an area where employers should use extreme caution. Under federal law, this type of deduction may be permissible for non-exempt employees as long as certain rules are followed. If the employee is classified as exempt under the Fair Labor Standards Act (FLSA), this type of deduction is prohibited. For non-exempt employees (also known as hourly employees), such a deduction would be permitted only if it does not reduce pay below the highest applicable minimum wage (federal, state, or local) and doesn't reduce any overtime pay due. 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 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: Your state law may further limit your ability to deduct for the cost of unreturned property, 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.
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