Learn when and how to create final paychecks in QuickBooks Payroll products.
Letting an employee go is challenging. When an employee no longer works for you, you need to give them their final paycheck to cover their remaining wages.
Here's how to create final employee paycheck in each payroll product. We'll also offer some guidance if you're not sure how to handle severance.
Step 1: Understand final paycheck guidelines
If you terminate an employee for any reason, including discharge, layoff, or resignation, you must pay them for all time owed on a final or termination paycheck.
- Amount of pay: How much you pay depends on the agreement you have with your employees. You also need to follow state and federal tax laws.
- Sick and vacation time: The Fair Labor Standards Act (FLSA) doesn't require payment for time not worked, such as vacation, sick leave, or federal or other holidays. However, your state might.
- Severance pay: Severance pay is a payment package offered to employees based on length of service and salary requirements. There are no requirements in the Fair Labor Standards Act (FLSA) for severance pay. However, your state might have regulations.
- Taxes: Final or severance paychecks are subject to regular taxes or supplemental rates if paid as bonuses.
Reach out to your state agency for more info about your state's legal and tax requirements.
Step 2: Create a final paycheck
Follow the steps to create your employee's final paycheck in the payroll product you use.
|Note: Not sure which payroll service you have? Here's how to find your payroll service.
Step 3: Update your employee's payroll status
Once you have created the final paycheck for your employee, update their employee status in your payroll service.