Timing the Last Paycheck

• The federal government does not mandate when you must issue an employee's final paycheck. However, many states have very specific rules. For employees who are fired or laid off, most states require payment on the next regularly scheduled payday, but some require it much earlier. For example, California requires you to pay the employee immediately upon termination. When employees quit, many states require only that the last check be issued on the next scheduled payday. However, states like Oregon require immediate payment, provided the employee has given two days' notice.
  
  

Severance Pay

• No federal laws guide severance pay policies. Beyond hours worked, extra money included in an employee's final paycheck depends on the employee's contract, the company's usual standard of behavior and state laws. This means that if your company does not use a formal contract at the time of hire, and does not have a history of providing severance pay, then no severance is required unless state law says otherwise. For example, some states require you to pay a severance amount if you are a large company that must lay off a large number of employees. Your state's labor department provides specific information for your situation.
  
  

Unused Vacation Pay and Sick Days

• The policy on unused vacation and sick days is usually stated at the time an employee is hired. The initial contract must be honored unless it is found to be unfair. For example, if one employee's contract says that he will not be paid unused accrued sick and vacation time, but all other employees receive that benefit when they quit, then the employer will have to pay that benefit to the employee whose contract read differently unless it can justify the difference. There are no federal laws that govern final payment of these benefits beyond upholding contracts. However, a few states, such as California, do have some rules so check with your state's department of labor to be sure.
  
  

Exceptions

• In some instances, you need to include additional money in an employee's final paycheck. For example, you may owe an employee overtime, or a minimum wage adjustment for underpaid wages. Including those amounts with the final check helps you avoid expensive court costs should the employee try to collect after termination. In addition, the Davis Beacon Act requires that contractors on government projects be paid an amount equal to the usual private sector wage. If you paid the employee less, then you might need to include an adjustment in the final check.