Employer Guidelines For Handling Unclaimed Paychecks
Amazingly, departing employees don't always collect all wages owed to them! Unfortunately, as a payroll professional, that becomes your problem!
Believe it or not, you just can't keep a paycheck that an ex-employee fails to claim. In fact, there are legal requirements that employers must follow for surrendering these unclaimed paychecks to legal authorities.
Employers should be aware of the unclaimed paycheck laws for the states in which they have workers, as there are often penalties for violating these laws. Don't be caught unaware! Read the state-specific information below and/or take one of our recommended training sessions on unclaimed paychecks.
Recommended Training For Handling Unclaimed Paychecks
Don't get caught - and penalized - for not following unclaimed paycheck laws for the state(s) in which you do business. Click the applicable link below to order our training course on Unclaimed Paychecks.
Failure to comply with state regulations regarding unclaimed paychecks can result in audit assessments, significant interest accumulations, and criminal penalties. And organizations with corporate headquarters in one state and employees in other states could be liable for penalties in all states that they have employees. Do you know your obligations? Attend this training session and learn:
When wages are considered abandoned
What is payroll's responsibility relating to abandoned wages
The Escheatment rules in general and then as they pertain to the payroll department
What are your requirements in notifying the employee that they have an un-cashed check?
How long do you hold the check before it is escheated to the state?
Which state are you required to escheat to?
How to set up a system to handle unclaimed payroll checks routinely to avoid a costly audit
How to establish proper procedures for tracking unclaimed wages correspondence
Generally speaking, unclaimed paychecks, employers are required to hand over the amount of the check to their state. This process, called "escheatment", requires abandoned or unclaimed personal property to be submitted to the state after a certain time period (depending upon the state, "unclaimed" means from one to five years).
Even if a check is abandoned, the employer has no right to void the check. The funds from an uncashed payroll check should never be returned to the company's payroll checking account. Employers must keep the funds available to pay the employee or to submit to the state.
Yes. Unclaimed paychecks are subject to escheat laws as unclaimed property. The laws of the state where the employee last worked apply. Employers that have a paycheck for a former employee or employee which has not been claimed for a period of time must follow the same state reporting timeline as for other property.
Yes. Employers can be fined or penalized if they don't return the check, even if the person can't be found. In these situations, employers are legally bound by state law to return any uncashed paychecks to the state where the person last worked.
Unclaimed paychecks are subject to escheat laws as unclaimed property. As such, the laws of the state where the employee last worked apply. As such, employers should return any uncashed paychecks to the state where the person last worked.
Find Seminars, Webinars, And Online Training In Your Area
State-Specific Rules For Unclaimed Paychecks
State and federal law requires that employers give departing employees their final paycheck within a specified time period or - if a paycheck goes unclaimed - to follow state escheatment rules. Click your state from the table below to find out more about your state's rules.
Q: What Happens To Unclaimed Paychecks? A: Generally speaking, unclaimed paychecks, employers are required to hand over the amount of the check to their state. This process, called "escheatment", requires abandoned or unclaimed personal property to be submitted to the state after a certain time period (depending upon the state, "unclaimed" means from one to five years).
Q: What Should Employers Do With Uncashed Or Unclaimed Payroll Checks? A: Even if a check is abandoned, the employer has no right to void the check. The funds from an uncashed payroll check should never be returned to the company's payroll checking account. Employers must keep the funds available to pay the employee or to submit to the state.
Q: Are Unclaimed Payroll Checks Subject To Unclaimed Property Laws? A: Yes. Unclaimed paychecks are subject to escheat laws as unclaimed property. The laws of the state where the employee last worked apply. Employers that have a paycheck for a former employee or employee which has not been claimed for a period of time must follow the same state reporting timeline as for other property.
Q: Are There Penalties For Not Forwarding Uncashed Payroll Checks? A: Yes. Employers can be fined or penalized if they don't return the check, even if the person can't be found. In these situations, employers are legally bound by state law to return any uncashed paychecks to the state where the person last worked.
Q: What Should Employers Do If They Cannot Find The Ex-Employee? A: Unclaimed paychecks are subject to escheat laws as unclaimed property. As such, the laws of the state where the employee last worked apply. As such, employers should return any uncashed paychecks to the state where the person last worked.
Disclaimer:
This information is based on a variety of state laws and regulations, and is subject to change. The PayrollTrainingCenter makes every effort to make sure this information is current and accurate, however, the PayrollTrainingCenter is not engaged in rendering legal or professional advice and shall not be held responsible for any inaccuracies contained herein.
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