Run a dismissal payroll

There are a few things to keep in mind when processing a dismissal payroll—make sure the employee is properly dismissed first. Use the dropdowns below to understand how to process the dismissal payroll.

For an overview of dismissal payrolls, and the compliance regulations behind them, like final pay and PTO, head to this article.

Keep in mind, dismissals can’t be reversed, so make sure that you want to end the employee's employment and remove them from future payrolls.

To dismiss a contractor, head to this article instead.

Dismissal payroll: basic information

Dismissals can’t be reversed, so make sure that you want to end the employee's employment and remove them from future payrolls.

Some states require the final paycheck be issued in person. To keep you compliant, all dismissal payrolls are defaulted to be paid out via check.

You can run the dismissal payroll at any time. If you run the dismissal payroll before the actual dismissal date, the employee won't receive an email notification from us about the payment. For more information on dismissal notifications, head to this article and refer to the Dismissing an employee overview section.

Deductions:

Externally managed benefits: Automatically apply to the dismissal payroll.
Benefits managed by Gusto: The dismissal payroll will always include one pay-period's worth of deductions automatically.
- Important: Gusto cannot prorate deductions. For example, an employee is dismissed on 1/15/18 and benefits continue through 2/01/18, our system will not capture the remaining deductions the employee owes for the second half of the month.
- If you'd like to apply additional deductions, you'll need to process the final payroll as an off-cycle payroll and choose to apply deductions.

Dismissal paycheck requirements by state

Employers must make sure they know when to:

Legally pay departing employees.
- Most states require that employers give departing employees their dismissal (or final) paychecks within a set period of time, or even on the employee’s last day of work. In some states, the time period varies depending on whether the employee quit or was fired/laid off.
Pay out unused vacation hours to departing employees (if required).

Stay compliant

While employers often assume they should pay the dismissal paycheck on the company’s next scheduled payroll, it’s often the case that the payroll is scheduled for after the applicable dismissal payment deadline. This can lead employers to unknowingly violate the law.

The consequences of paying a departing employee late can be significant - ranging from penalties imposed by the state, to extra damages paid to the employee, or even criminal consequences in some states.

Use the table below to help inform you of whether your state has a specific deadline and/or unused vacation pay requirements.

For additional information about the current requirements, visit your states’ Department of Labor website.
If you still have specific questions about whether your termination payment process is compliant, consult an employment attorney.

This table was last revised May 17th 2022.

State	Dismissal paycheck deadline(s)	Is there a requirement for paying out unused vacation?	Additional information
Alabama	No statute	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Alaska	If employee leaves involuntarily: Within 3 working days. If employee leaves voluntarily: Next scheduled payday that is at least 3 days after the employee gives notice.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Arizona	If employee leaves involuntarily: Within 7 working days or the next scheduled payday, whichever is sooner. If employee leaves voluntarily: Next regular payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Arkansas	If employee leaves involuntarily: Within 7 working days. If employee leaves voluntarily: Next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
California	You're required to pay the employee on their last day	Yes	Employers are required to pay employees any accrued, unused vacation time upon termination.
Colorado	If employee leaves involuntarily: Immediately, with some exceptions. If employee leaves voluntarily: Next regular payday.	Yes (may depend on an employer's policy)	Earned vacation time is considered wages required to be paid out upon termination.
Connecticut	You're required to pay the employee on their last day	Yes	You're required to pay out all unused PTO with their final paycheck.
Delaware	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	Yes	You're required to pay out all unused PTO with their final paycheck.
Florida	No statute	No	No state statute addresses payment of accrued vacation on termination.
Georgia	No statute	No (unless otherwise state)	You're only required to pay out unused PTO if your company's PTO policy specifies that it will be paid out. Otherwise, you aren't required to pay out unused PTO.
Hawaii	You're required to pay the employee on their last day.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Idaho	If employee leaves involuntarily: Next scheduled payday or within 10 business days, whichever is sooner. If employee makes a written request for earlier payment, within 48 hours (excluding weekends & holidays) of receiving the request. If employee leaves voluntarily: Next scheduled payday or within 10 business days, whichever is sooner. If employee makes a written request for earlier payment, within 48 hours (excluding weekends & holidays) of receiving the request.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Illinois	If employee leaves involuntarily: Immediately if possible, but no later than the next scheduled payday. If employee leaves voluntarily: Immediately if possible, but no later than the next scheduled payday.	Yes	An Illinois company cannot put into place a company policy that does not pay out PTO upon termination.
Indiana	If employee leaves voluntarily: You're required to pay them on the company's next regular payday. If employee leaves involuntarily: You're required to pay them within 10 days of their last day. If you're mailing the final paycheck and you don't have their mailing address, you have up to 10 days after they provide it to you.	No	You can pay out unused PTO if you'd like, but you aren't required to.
Iowa	You're required to pay the employee on or before the company's next regular payday.	Yes	You're required to pay out all unused PTO with their final paycheck.
Kansas	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Kentucky	You're required to pay the employee on or before the company's next regular payday.	Yes	You're required to pay out all unused PTO with their final paycheck.
Louisiana	You're required to pay the employee on or before the company's next regular payday.	Yes	Earned vacation time is considered wages required to be paid out upon termination.
Maine	You're required to pay the employee on or before the company's next regular payday.	Yes	You're required to pay out all unused PTO with their final paycheck.
Maryland	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	Yes (unless otherwise stated)	Employers are required to pay employees any accrued, unused vacation time upon termination unless the employer's written policy states that vacation time will be forfeited upon termination.
Massachusetts	You're required to pay the employee on their last day.	Yes	Employers are required to pay employees any accrued, unused vacation time upon termination.
Michigan	MI law says final paychecks must be paid as soon as possible. We recommend paying the employee no later than the company's next regular payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Minnesota	If employee quits: You're required to pay them on the company's next regular payday. If employee is fired: You're required to pay them on their last day. If employee is laid off: You're required to pay them within 24 hours of their last day.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Mississippi	No statute	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Missouri	You're required to pay the employee on their last day.	No	Employers are not required to pay employees for earned, unused vacation upon termination.
Montana	Your company is allowed to pay dismissed employees on the company's regular payday if you have a written policy indicating that this is when final paychecks will be provided. If your company doesn't have that policy in writing, you're required to pay the employee within 4 hours or by the end of the employee's last day—whichever is sooner.	Yes	You're required to pay out all unused PTO with their final paycheck.
Nebraska	You're required to pay the employee on or before the company's next regular payday.	Yes	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Nevada	You're required to pay the employee on their last day.	No	Employers are not required to pay employees for earned, unused vacation upon termination.
New Hampshire	If employee leaves involuntarily: Within 72 hours. If employee is laid off, then until the next scheduled payday. If employee leaves voluntarily: Next scheduled payday. If the employee gives at least one pay period’s notice, then within 72 hours.	No	You can pay out unused PTO if you'd like, but you aren't required to.
New Jersey	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	Yes	You're required to pay out all unused PTO with their final paycheck.
New Mexico	If employee leaves involuntarily: You're required to pay them within 5 days of their last day. If employee leaves voluntarily: You're required to pay them on or before the company's next regular payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
New York	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
North Carolina	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
North Dakota	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	Yes, in most cases	Must pay accrued time off unless employee is leaving voluntary and all of the following apply: Employee has been employed for less than 1 year Policy states that there is a limitation of pay of accrued time off The employee gave the employer less than 5 days verbal or written notice
Ohio	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Oklahoma	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	Yes	You're required to pay out all unused PTO with their final paycheck.
Oregon	If employee leaves involuntarily: You're required to pay them no later than the day after their last day. If employee leaves voluntarily: You're required to pay them on their last day.	Yes	You're required to pay out all unused PTO with their final paycheck.
Pennsylvania	If employee leaves involuntarily: You're required to pay them no later than the day after their last day. If employee leaves voluntarily: You're required to pay them on their last day. If the employee requests that their final paycheck be paid by mail, you must comply.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Rhode Island	If employee leaves involuntarily: You're required to pay them no later than the day after their last day. If employee leaves voluntarily: You're required to pay them on their last day.	Sometimes	If the employee has been working for the company for more than one year, you're required to pay out all unused PTO with their final paycheck. If the employee has been working for the company for less than one year, you aren't required to pay out unused PTO.
South Carolina	If employee leaves involuntarily: Within 48 hours or the next scheduled payday, but not to exceed 30 days. If employee leaves voluntarily: Within 48 hours or the next scheduled payday, but not to exceed 30 days.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
South Dakota	If employee leaves involuntarily: Next scheduled payday or when the employee returns all the employer’s property (e.g. company phone). If employee leaves voluntarily: Next scheduled payday or when the employee returns all the employer’s property (e.g. company phone).	No (unless otherwise stated)	Employers are not required to pay employees for earned, unused vacation upon termination.
Tennessee	If employee leaves involuntarily: Next scheduled payday or within 21 days, whichever is later. If employee leaves voluntarily: Next scheduled payday or within 21 days, whichever is later.	Yes	You're required to pay out all unused PTO with their final paycheck.
Texas	If employee leaves involuntarily: Within 6 days. If employee leaves voluntarily: Next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Utah	If employee leaves involuntarily: Within 24 hours. If employee leaves voluntarily: Next scheduled payday.	No (unless otherwise stated)	Employers are required to pay employees any accrued, unused vacation time upon termination unless the employer's written policy states that vacation time does not accrue and will be forfeited upon termination.
Vermont	If employee leaves involuntarily: Within 72 hours. If employee leaves voluntarily: Next scheduled payday, or the following Friday if not scheduled payday.	No (unless otherwise stated)	You're required to pay out all unused PTO with their final paycheck.
Virginia	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Washington	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday. There are some exceptions for specific industries.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Washington DC	If employee leaves involuntarily, you're required to pay them the day after their last day. If employee leaves voluntarily, you're required to pay them on or before the company's next regular payday or within 7 days of their last day—whichever is sooner.	Yes (unless otherwise stated)	You're required to pay out all unused PTO with their final paycheck unless your company has a written policy that indicates unused PTO will not be paid out when an employee leaves the company.
West Virginia	If employee leaves involuntarily: Next scheduled payday. If employee leaves voluntarily: Next scheduled payday.	Yes	You're required to pay out all unused PTO with their final paycheck.
Wisconsin	If employee leaves involuntarily: Next scheduled payday, or within 24 hours if termination occurs as a result of liquidation, merger, disposal, or removal of the business. If employee leaves voluntarily: Next scheduled payday. There are some exceptions for specific industries.	No (unless otherwise state)	You're only required to pay out unused PTO if your company's PTO policy specifies that it will be paid out. Otherwise, you aren't required to pay out unused PTO.
Wyoming	You're required to pay the employee on the company's next regular payday, unless the employment contract indicates otherwise.	Yes	You're required to pay out all unused PTO with their final paycheck.

Run a dismissal payroll

After you've dismissed your employee in Gusto, you may be prompted to process a dismissal payroll to pay out their final wages. Dismissal payrolls can be issued by check or direct deposit depending on your applicable state rules regarding final payment.

If you need to backdate a dismissal, please contact us through the Help or Priority support section of your Gusto account.

Click the Payroll section and select Run payroll, or click the notification on your Home page for the dismissal payroll.
Under Special Payroll, select the dismissal payroll.
- The dismissal payroll will appear here after the final day of employment.
- If the dismissal payroll doesn't appear here, this means it was selected to pay the employee their final pay on the company's next regular payroll.
Click Run Payroll.
If you have multiple bank accounts set up, select which bank account you'd like to process payroll from.
- If you don't see this option, head to this article to learn more.
View the prorated payment, and enter any amounts for a bonus, severance, reimbursements or other additional earnings.
- If state rules permit, you can click the caret next to "Check" to change the payment to "Direct deposit."
- Note: If you choose to pay the employee by direct deposit, Gusto doesn't have insight into when the direct deposit will hit their bank account. This is because it's the employee's bank that processes the depositing of the actual funds.
Click Add Personal Note to include a message on the employee's paystub.
Click Save & Continue.
On the Time Off screen, you'll have the option to select a checkbox and pay out any remaining vacation hours owed.
- Check out this article for dismissal paycheck requirements (by state).
- If you wish to also pay out any remaining sick hours, add the amount on this page.
Click Save & continue.
Review the payroll information and click Submit payroll.
If you processed the payment as check, write the final amount on a check and hand it to your employee.

Your employee will see this paystub in their Gusto account one day after their dismissal date.

If you're looking to dismiss a contractor, head to this article.

Calculate prorated pay for a dismissal payroll

When you dismiss an employee, Gusto automatically prorates the last payment if this is processed through the employee's last payroll or through a dismissal payroll. If you didn't pay a dismissed employee through one of these methods, you can manually calculate the prorated amount and process this through an off-cycle payroll.

One way to accomplish this is by finding the daily rate for the employee's salary. Multiply this rate by the number of days they worked, and this will give you the prorated amount.

Get the daily rate: divide the salary by 260 (# of working business days in a year).
Prorated amount: multiply the daily rate by how many days they worked.
Round this number to the nearest cent.

Example

Your employee who earned a $100,000 salary was dismissed after 3 days into a pay period. To calculate how much he should be paid:

Get the daily rate: $100,000/260 = $384.61538
Prorated amount: $384.61538 x 3 = $1,153.8461
Rounded Prorated Amount: $1,153.85

Pay a dismissed employee

When you dismiss an employee, there's an option to pay them severance in a dismissal payroll. If you still need to pay severance, or pay another type of earning, you can process an off-cycle payroll to submit this payment for a dismissed employee:

Click the People section and select Team members.
Click Show dismissed people.
Choose the employee.
Under Additional Payrolls on the right-hand side, click Run off-cycle payroll.
Click +Other Earnings.
Add the severance amount in the Severance field.
Click Add Personal Note to include a message about severance on your employee's paystub.
Click Save & Continue.
Click Submit Payroll.

Dismissing an employee with a garnishment

Legal Requirement: If you dismiss an employee with a garnishment order for any reason, you're required by law to notify the collecting agency immediately. State guidelines vary, but it's recommended you contact the agency 5 days after you learn that an employee will cease employment or within 5 days after dismissal, whichever occurs earlier.

Important: Gusto will debit and remit payment for garnishments on dismissal payrolls for all states except for South Carolina.

This form from the U.S. Department of Health & Human Services is accepted as fulfillment of the cessation of employment requirements for some states but not all. States may require additional information or specific employer action.

Online Reporting

Electronic Termination (eTerm) on the Federal Child Support Portal allows you to notify the state child support agency electronically when an employee terminates. If you'd like to report terminations online and are not currently registered, you can register to use the employer's online services, including eTerm, on the Portal.

Run a dismissal payroll

State

Dismissal paycheck deadline(s)

Online Reporting