California employers need to have a thorough practice in place for paying separating employees. There are several items to take into account which can make missing a crucial step easy. While an outline of final pay requirements is explained in this post, a documented process is strongly encouraged. Reach out to our consulting team for assistance and questions.
Key definition: “Final pay” includes all final wages for hours worked and any accrued but unused paid time off (PTO) or vacation. You may have other forms of wages based on your industry, type of business, etc. Reach out to our team for more in-depth guidance.
When did the employee give notice?
If your employee gave you at least 72 hours notice of their last day worked, then you must have their final pay ready for them on their last day. If your employee gave you less than 72 hours notice, you must have their final pay ready within 72 hours after they give notice.
Very important note: this is actual hours, not business hours.
What if I terminate an employee? When am I required to pay them?
If you are terminating an employee, also known as an involuntary termination, then you are the moving party. In this instance, you must ensure the employee’s final pay is available at the time they are terminated.
How can I pay my employee their final pay?
Employers must make their exiting employee’s final pay ready and available to pick up at their regular place of work within the timeframes listed above. An employer can mail the final pay as long as the employee has given written consent. The mailing date would be considered the payment date.
If the employee does not specify that they would like their final pay mailed, then the employer should hold the check at the employee’s regular place of work until it is picked up.
This can be challenging for employers to navigate, especially post-pandemic. In a survey completed by the American Payroll Association in 2022, 93% of employees are being paid by direct deposit. Reach out to the consulting team for guidance on paying final pay via direct deposit.
What happens if my employees final pay is late?
California has something called “waiting time penalties.” For every day final pay is delayed, you owe a day of wages, up to 30 days. This applies in various situations including a delayed direct deposit, paper check being delayed in the mail from company headquarters, or an employer firing an employee on the spot and providing final pay more than a day later.
In conclusion
There are many requirements to consider when compiling final pay in California. Reach out to our consulting team for guidance.