Run a dismissal payroll

There are a few things to keep in mind when processing a dismissal payroll—make sure to dismiss the employee first. Keep in mind, dismissals cannot be reversed, so make sure that you want to end the employee's employment and remove them from future payrolls.

We recommend reading our overview of dismissal payrolls to learn about compliance regulations, like final pay and PTO, before processing the dismissal payroll.

To dismiss a contractor, go to this article instead.

Dismissal payroll: Basic information

Dismissals cannot 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.

Dismissal payrolls populate after you dismiss an employee, and can be run at any time. If you run the dismissal payroll before the actual dismissal date, the employee will not 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

When dismissing an employee (or when they depart on their own), 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 determine if 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 Sept 2023.

State	Dismissal paycheck deadline(s)	Requirements 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 the employee leaves involuntarily: Within 3 working days. If the employee leaves voluntarily: Next scheduled payday, that's 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 the employee leaves involuntarily: Within 7 working days or the next scheduled payday, whichever is sooner. If the 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	You're required to pay the employee by the next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
California	If the employee leaves involuntarily: Immediately. If the employee leaves voluntarily: Immediately if they give at least 72 hours of notice. The payment is due within 72 hours if no notice was given.	Yes	Employers are required to pay employees any accrued, unused vacation time upon termination.
Colorado	If the employee leaves involuntarily: Immediately, with some exceptions. If the employee leaves voluntarily: Next regular payday.	Yes	Earned vacation time is considered wages required to be paid out upon termination.
Connecticut	If the employee leaves involuntarily: Next business day. If the 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.
Delaware	You're required to pay the employee on the next scheduled payday, or within 3 business days, whichever is later.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Florida	No statute	No	No state statute addresses payment of accrued vacation on termination.
Georgia	No statute	No	No state statute addresses payment of accrued vacation on termination.
Hawaii	If the employee leaves involuntarily: You're required to pay the employee on their last day. If the employee leaves voluntarily: Next scheduled payday, unless the employee gives at least one pay period’s notice of intention to quit, then 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 the employee leaves involuntarily: Next scheduled payday or within 10 business days, whichever is sooner. If the employee makes a written request for earlier payment, within 48 hours (excluding weekends and holidays) of receiving the request. If the employee leaves voluntarily: Next scheduled payday or within 10 business days, whichever is sooner. If the employee makes a written request for earlier payment, within 48 hours (excluding weekends and 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 the employee leaves involuntarily: Immediately if possible, but no later than the next scheduled payday. If the 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	You're required to pay the employee by the next scheduled payday.	Yes (unless otherwise stated)	Accrued vacation pay is considered a form of compensation. An employee may be entitled to accrued unused vacation time if they've met any certain conditions of a company policy or employment contract.
Iowa	You're required to pay the employee 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.
Kansas	You're required to pay the employee on or before the company’s 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 the next scheduled payday, or within 14 days, whichever is later.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Louisiana	You're required to pay the employee on the next scheduled payday or within 15 days, whichever is sooner.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Maine	You're required to pay the employee on or before the company's next regular payday. If you have less than 10 employees, this may not apply—contact the state directly to confirm this.	Yes	You're required to pay out all unused PTO with their final paycheck.
Maryland	If the employee leaves involuntarily: Next scheduled payday. If the 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	If the employee leaves involuntarily: You're required to pay the employee on their last day. If the employee leaves voluntarily: Next scheduled payday.	Yes	Employers are required to pay employees any accrued, unused vacation time upon termination.
Michigan	You're required to pay the employee on or before the company’s next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Minnesota	If the employee leaves involuntarily: You're required to pay the employee within 24 hours of their demand for wages. If the employee leaves voluntarily: You're required to pay the employee by the next scheduled payday that's more than 5 days and less than 20 days from 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	No state statute addresses payment of accrued vacation on termination.
Missouri	If the employee leaves involuntarily: You're required to pay the employee on their last day. If the employee leaves voluntarily: Next scheduled payday.	No	Employers are not required to pay employees for earned, unused vacation upon termination.
Montana	If the employee leaves involuntarily: Immediately, unless you have a pre-existing written policy that extends the timing of final payment. The written policy cannot exceed the next scheduled payday or 15 days, whichever is earlier. If the employee leaves voluntarily: Next scheduled payday or 15 days, whichever is earlier.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Nebraska	You're required to pay the employee on the company's next regular payday or within two weeks, whichever is sooner.	Yes	All earned and unused vacation and PTO benefits must be paid to the employee with their final wages.
Nevada	If the employee leaves involuntarily: Immediately. If the employee leaves voluntarily: Next scheduled payday or 7 days, whichever is earlier.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
New Hampshire	If the employee leaves involuntarily: Within 72 hours. If the 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 are not required to.
New Jersey	If the employee leaves involuntarily: Next scheduled payday. If the 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.
New Mexico	If the employee leaves involuntarily: You're required to pay them within 5 days of their last day. If the 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	You're required to pay the employee by the next scheduled payday.	Yes	An employer must pay the employee for accrued unused vacation if there's no written forfeit policy.
North Carolina	You're required to pay the employee by the next scheduled payday.	Yes	An employer must pay the employee for accrued unused vacation if there's no written forfeit policy.
North Dakota	You're required to pay the employee by the 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's a limitation of pay of accrued time off. The employee gave the employer less than 5 days verbal or written notice.
Ohio	You're required to pay the employee by the next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Oklahoma	You're required to pay the employee by the next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Oregon	If the employee leaves involuntarily: You're required to pay them by the end of the next business day. If the employee leaves voluntarily: You're required to pay them on their last day if they quit with at least 48 hours' notice, unless that day is a weekend or holiday. In that case, their check is due on the next business day. If the employee quits with less than 48 hours' notice, then you’re required to pay them on the next scheduled payday or within 5 business days, whichever comes first.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Pennsylvania	You're required to pay the employee by the next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Rhode Island	You're required to pay the employee by the next scheduled payday.	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 are not required to pay out unused PTO.
South Carolina	If the employee leaves involuntarily: Next scheduled payday, but not to exceed 30 days. If the employee leaves voluntarily: 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 the employee leaves involuntarily: Next scheduled payday. If the 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.
Tennessee	If the employee leaves involuntarily: Next scheduled payday or within 21 days, whichever is later. If the employee leaves voluntarily: Next scheduled payday or within 21 days, whichever is later.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Texas	If the employee leaves involuntarily: Within 6 calendar days. If the 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 the employee leaves involuntarily: Within 24 hours. If the 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.
Vermont	If the employee leaves involuntarily: Within 72 hours. If the 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.
Virginia	You're required to pay the employee by the 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 the employee leaves involuntarily: Next scheduled payday. If the 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 the employee leaves involuntarily: You're required to pay them the day after their last day. If the 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	You're required to pay the employee by the next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.
Wisconsin	You're required to pay the employee by the next scheduled payday.	Yes (unless otherwise stated)	You're required to pay out unused PTO if your company's PTO policy does not include a written PTO forfeit policy. If your PTO policy includes forfeiture, then you are not required to pay out unused PTO.
Wyoming	You're required to pay the employee by the next scheduled payday.	No (unless otherwise stated)	An employer’s policy or employee contract governs whether earned, unused vacation is paid upon termination.

Run a dismissal payroll

After you've dismissed your employee in Gusto, admins with the required permissions 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've already paid the employee and need to remove the dismissal payroll notification, skip the payroll.

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

Sign in to Gusto.
Click the Pay section and select Run payroll, or click the notification on your Home page for the dismissal 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 do not 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.
- Click the prorated amount if you wish to change it.
- 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 a 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 did not 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 already processed their dismissal payroll, but still need to pay severance (or pay another type of earning), process an off-cycle payroll to submit this payment for a dismissed employee.

Keep in mind that you must have the required admin permissions to run this payroll.

Sign in to Gusto.
Click the People section and select Team members.
Toggle to the Dismissed tab.
Click on the employee's name.
Toggle to the Pay tab.
Scroll to the bottom and click Run off-cycle payroll in the "Recent paystubs" section.
Click + Other Earnings.
Scroll to the bottom and add the severance amount in the "Severance" field.
- This option only appears once the employee has been dismissed.
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.

It’s our policy to guarantee lifetime access of payroll information to all users, subject to compliance with our Terms of Service.

Run a dismissal payroll

State

Dismissal paycheck deadline(s)

Online reporting