How to Pay an Employee's Final Wages

Author: Alice Gilman

Most employees are considered at-will employees, which means, absent some discriminatory reason, they can be terminated at any time for any reason. On the other hand, an employee may resign for any reason or may retire. But whatever the reason, a separation from employment is the catalyst for a series of actions, including the payment of final pay, the determination of what items must be included in the final wage payment and the income tax withholding method that will be applied to those items. State wage payment laws govern most of these considerations and they include stiff penalties for an employer that fails to comply.

A payroll manager should never guess why a separation is occurring but, instead, should discuss it with the employee's immediate supervisor or HR and get documentation of the nature of the separation before making the final wage payment. Ancillary documents, such as an employment contract or collective bargaining agreement, should also be checked to determine whether any additional payments must be made upon an employee's separation.