When you dismiss an employee in Gusto — whether they were terminated, laid off, or chose to leave — you may need to run a dismissal payroll to issue their final paycheck. This article walks you through how to run that payroll, what Gusto prorates automatically, and what to watch for around state compliance for the last paycheck.
Pro tip: Gusto handles the math and tax filing on a dismissal payroll. We share state-specific rules in the table below so you know your deadlines, but we cannot tell you what a specific situation legally requires. For tailored guidance — like whether to offer severance, how to handle disputed pay, or what your separation agreement should say — work with an HR professional or employment attorney.
To pay a dismissed employee, you’ll:
Check your state’s final paycheck rules in the state table below
Run the dismissal payroll (steps below)
For contractors, see our dismiss or rehire contractors article
A dismissal payroll is a separate payroll Gusto creates so you can issue an employee’s final paycheck outside your regular pay cycle — also called a final payroll or termination payroll.
Reminders:
Some states require you to issue the last paycheck in person. To stay compliant, dismissal payrolls default to check payment. You can change it to direct deposit when running the payroll.
If you already paid the employee on a regular or off-cycle payroll, you can skip the dismissal payroll instead of running it.
To backdate a dismissal, contact us through the Help section of your Gusto account.
Hours tracked in Time tracking will sync to the dismissal payroll automatically.
Dismissal payrolls can be issued by check or direct deposit, depending on your state’s rules (see the “Dismissal paycheck requirements by state” section below).
To run a dismissal payroll:
Click the Pay section and find the Dismissal payroll, or click the notification on your Home page for the dismissal payroll.
The dismissal payroll will appear here after the final day of employment
If the dismissal payroll does not appear here, the employee was set to get their final pay on the company’s next regular payroll
Click Run.
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, see our manage company bank account details article to learn more
View the Prorated payment and enter any amounts for a bonus, severance, reimbursements, or other additional earnings.
Hover over the Prorated amount to see how it was calculated (based on the pay-through date)
You can edit hours to change the prorated amount
If state rules permit, click the caret next to Check to change the payment to Direct deposit
Note: If you pay the employee by direct deposit, Gusto does not have insight into when the direct deposit will hit their bank account. The employee’s bank processes the deposit of the actual funds
Click Add Personal Note to include a message on the employee’s paystub.
Click Save and Continue.
On the Time Off screen, unused time off will automatically populate based on how the policy is set up.
See the “Dismissal paycheck requirements by state” section below for state-specific rules
To also pay out any remaining sick hours, add the amount on this page
Click Save and 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 pay-through date.
Important: Dismissals cannot be reversed. Make sure you want to end employment and remove the employee from future payrolls before moving forward.
Important: Severance is not automatically taxed at the 22% supplemental rate. To tax severance at the 22% supplemental rate, you need to run it separately as an off-cycle or extra pay payroll and edit the tax rate. Otherwise, the regular withholding rate will be applied.
When an employee is dismissed, every state has its own rules about:
When you must issue a final paycheck.
Whether unused PTO must be paid.
Important: In some states, late payments can lead to penalties, damages, or even criminal consequences. Always review your state’s Department of Labor website.
If you have specific questions about a termination, work with an employment attorney.
See the table in this article for details by state.
Table last revised April 21, 2026.
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
If the employee leaves involuntarily:* Next scheduled payday. If payment is not made within seven days of that payday, the employer is liable for double the wages owed.
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.
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 or before the next scheduled payday.
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 immediately or no later than the next working day.
If the employee leaves voluntarily: You’re required to pay the employee on the last day of work if notice is given. If the employee resigns without notice, pay is due on the next regular payday.
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; however, earned vacation cannot be forfeited by policy.
Maine
If you have more than 10 employees, 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 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: You must pay on either the next regular payday or within seven days after they resign (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, 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.
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.
No (unless otherwise stated)
If the employee has been working for the company for at least one year, you're required to pay out all unused PTO with their final paycheck.
If the employer closes, merges, sells, or moves the business out of state, they must pay all wages within 24 hours. If the employee has worked there for at least one year, the employer must also pay holiday pay, vacation pay (full or prorated), and any insurance benefits within 24 hours, if a written or verbal agreement or policy provides these benefits.
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.
There are some exceptions for commissions for a sales agent.
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.
Deductions on a dismissal payroll — for benefits, 401(k), and severance — work a little differently than they do on a regular payroll. Here’s what to expect.
Externally managed benefits — apply automatically
Gusto-managed benefits — one full pay period of deductions will always apply
Gusto cannot prorate deductions. For example, if an employee is dismissed on Jan. 15 and benefits continue through Feb. 1, we will not capture the remaining deductions the employee owes for the second half of the month
To apply additional deductions, process the final pay as an off-cycle payroll and choose to apply them
Severance pay — if marked as severance, 401(k) deductions (externally managed or integrated) will not apply
If you need to calculate a salaried employee’s prorated final pay manually — for example, when paying them on an off-cycle payroll instead of the dismissal payroll — here’s the formula Gusto uses.
Gusto prorates dismissal pay automatically on final regular payrolls or dismissal payrolls.
If you need to calculate manually, do so, and then pay them on an off-cycle payroll.
To find the daily rate for a salaried amount, multiply it by days worked.
Daily rate — annual salary ÷ 260 (workdays in a year)
Prorated pay — daily rate × days worked in the pay period
Example:
Annual salary — $100,000
Daily rate — $100,000 ÷ 260 = $384.62
Worked 3 days → $384.62 × 3 = $1,153.85 (rounded)
When you dismiss an employee, you can choose to pay severance in their dismissal payroll (find the dismissal payroll in the Offboarding tab).
If you already ran the dismissal payroll but still need to pay severance—or another type of earning—you can run an off-cycle payroll from their profile.
You must have the right admin permissions to run this payroll.
In the left menu, click People.
Click the Dismissed tab.
Click the employee’s name.
Under Information, click Pay.
Scroll to the Recent paystubs section.
Click Run off-cycle payroll.
Click + Other Earnings.
Enter the work period.
Enter the payment date.
Choose how deductions and contributions should be handled.
Review or edit tax withholding rates.
In the Hours and additional earnings section, click + Other Earnings.
Scroll down and enter the severance amount in the Severance field. This option only shows if the employee has been dismissed.
Severance pay will not count toward an employee’s 401(k) if the plan is managed outside of Gusto or through an integrated provider.
(Optional) Click Add Personal Note to include a message about severance on the paystub.
Click Save & Continue.
Click Submit Payroll.
If you’re dismissing an employee who has wage garnishments — including child support orders or Income Withholding for Support (IWO) orders — you have legal reporting requirements beyond running the final payroll. Here’s what to know.
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 we recommend you contact the agency 5 days after you learn that an employee will end employment or within 5 days after dismissal, whichever happens earlier.
Important: Gusto will debit and remit payment for garnishments on dismissal payrolls for all states except South Carolina.
This form from the U.S. Department of Health and Human Services is accepted as fulfillment of the end-of-employment requirements for some states, but not all. States may require additional information or specific employer action.
Electronic Termination (eTerm) on the Federal Child Support Portal lets you notify the state child support agency electronically when an employee ends employment. To report terminations online and you 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.