What Are My Payroll Requirements For Employees?

Here we answer questions like how often you have to pay employees, can you give pay checks to an employee’s friend, and a few other commonly asked questions about the law and requirements for payroll questions. The law can be very complicated and no employer wants to subject themselves to any legal liability and as such it is important to know what you can and can’t do, so for reason we often recommend that employers use a professional payroll service like ADP, Intuit, or PayChex. Further, there are valuable resources like the US Department of Labor and the small business administration which can help guide businesses to making and responsible decisions.

Here’s a few questions we will address today:

How Often Do I have to pay employees?
Can I make employees have their pay done by direct deposit?
Can I give a paycheck to and employee’s friend or family?
Do I have to pay an employee for unused vacation if they are fired?

ADP ParollThese payroll questions may seem simple but wage and hour issues can be tough, no matter how often you deal with them.  It may be because the payment of wages includes anything from paying an employee the correct rate for overtime hours worked, to whether you need to compensate an employee that is traveling for your business and is stuck at the airport for a cancelled flight. When it comes to payment of employee wages, employers will certainly have lots of questions around requirements about pay frequency and required notifications of change, whether they can require employees to get the compensation via direct deposit instead of a hand check, and whether accrued but unused vacation or sick time must be paid out on termination of employment.

Q: How often do I have to pay my employees?

A: Federal law does not regulate the frequency in which you must pay employee, however, a number of states do.  In some states, employers are required pay their employees on a weekly or bi-weekly basis, while other states allow employers to pay less frequently.  There are also a few industry-specific regulations with regard to how often the company employees have to be paid.  Regardless of how often employees must be paid, it is vital to establish regular paydays in advance and clearly communicate them to the entire staff from top to bottom.

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Q: Can I gave an employees paycheck to their friend or family member?

A: There is usually no law that prohibits an employer from giving an employee’s pay to a friend, if authorized by the employee.  It is not, however, a best practice to do so.  However, if you chose to let another person to pick up an employee’s paycheck, it is important to get the employee’s written permission and then have the person who picks up the paycheck acknowledge (in writing) the receipt of the employee’s paycheck.

Q: If an employee quits or is fired to I have to pay then their unpaid vacation time?

 Paychex-logoA: Generally, there is no federal requirement that mandates employers 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:

  • Employers must pay employees for unused vacation at the time of termination;
  • Employers must pay employees for unused vacation unless they have a policy that states that vacation won’t be paid out at termination;  or
  • Employers must pay employees for unused vacation at termination only if the employer has promised to do so.

Note: Employers in California who chose to create one all-inclusive PTO policy (providing paid sick time off in accordance with California’s paid sick time law), rather than having a sick leave policy separate from a PTO policy, will be required to pay out all accrued but unused PTO.

Q: Can I force employees to receive a direct deposit paycheck?

A: Whether you can require employees to get their pay by direct deposit depends on the state in which you do business in.  A number of states prohibit employers from forcing employees to get their compensation through alternative means (e.g., direct deposit). In these states (Connecticut), employees have to voluntarily authorize direct deposit or some other form of payment. Means. In the absence of state restrictions, federal law will permit employers to require their company employees to get their paycheck by direct deposit as long as the individual employee is free to select the financial institution to which the funds are going to be deposited.  It is important to get and retain a full written authorization document from employees for direct deposit.

Q: If a payday falls on a holiday when should I pay my employees?

A: If a scheduled company payday lands on a holiday, some states will require payment on the next business day.  In cases where such a requirement does not exist, employers usually have the option of paying employees on the day before or after the respective holiday.  Before the start of each calendar year, employers should determine and make known their paydays and what expect during their holiday schedule.

 

Q: If a non-exempt employee forgets to record their hours on theri timesheet do I have to pay her?

Intuit Payroll SolutionsA: Under the Fair Labor Standards Act and many state laws you absolutely have to pay them. An employer is required to pay the employee’s for all hours worked on the next scheduled payday, regardless of whether the person adhered to the businesses timekeeping policies.  If an employee failed to submit or sign a timesheet, ask them and their immediate supervisor to provide you with all of the hours worked and make certain the employee is paid correctly.

Q: If an employee quits do I have to give them their final paycheck on their last day of work even if it’s not our scheduled pay day?

A: Under federal law, whether fired or self-termination, a departing employee’s final paycheck must generally be given to them by the next regularly scheduled payday, but some states have implemented shorter timeframes for providing an employees final pay. At the state level, final payroll deadlines generally depend upon whether the employee initiates the separation or the employer does. Here again, a quality payroll service should be able to advise you on this matter.

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.

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Q: An employee  who resigned 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 may be permissible 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.