Dismiss and rehire employees

If you're an admin with the required permissions, you can dismiss and rehire employees from your Gusto admin profile. If you do not see the option to start an employee dismissal, reach out to the primary admin of the account.

When you dismiss an employee, there are many implications for their payroll and benefits. Use the dropdowns below to learn what happens when you dismiss an employee, including the timeline of notifications and important compliance implications to consider.

If you need to run a dismissal payroll, or pay a dismissed employee, go to this article. If you have no more employees left to pay, learn how to cancel your Gusto account. To dismiss or rehire a contractor, follow the steps outlined here.

Dismissing an employee overview

Use the dropdowns below to learn about the different parts of a dismissal.

Pay schedules

If you have more than two pay schedules, and dismiss an employee who was the only person remaining on the pay schedule, it cannot be deleted. At this time, Gusto also cannot delete the pay schedule on your behalf.

If you'd like to remove the pay schedule the single employee was on:

Edit how the employee is assigned—move the to-be dismissed employee to a pay schedule that'll still be active once they're gone.
Then, dismiss the employee.

Gusto will recognize that there are no employees assigned to the once-used pay schedule and remove it automatically.

Benefits managed by Gusto

If your health insurance benefits are managed by Gusto, we’ll automatically notify your insurance carriers when you dismiss your employee. Their coverage will end per the policy on file with your carrier. This is usually the end of the month, but could vary depending on your contract.

We'll also send a COBRA Election notice to the dismissed employee three days after they're dismissed to let them know about their continuation options. If this is your last active employee enrolled in an insurance policy, your carrier(s) will likely cancel the policy, including any continuation (COBRA) enrollments, and no employees will be able to enroll in continuation (COBRA).

Dismissing employees will remove them from future payrolls. We'll still retain their past payroll information for tax purposes and for generating their W-2 form at year-end.

Time tracking

Once you dismiss a team member, their tracked hours in Gusto will branch off your regular active pay period into an off-cycle pay period. Admins can access this off-cycle pay period from a card on the time tracking dashboard, or by choosing it from the dropdown above the team’s timesheets. The new pay period will have the same date range as your active pay period, but will include the label “off-cycle.”

Hours for dismissed team members can be reviewed, edited, and approved just like any other hours. Managers who can review and approve time for their direct reports will see the “off-cycle” label when reviewing the dismissed employee's hours, but will not see anything regarding dismissal.

Dismissed team members will not see any changes to their time tracking experience until their last day has passed. They'll also still have access to their timesheet in their Gusto profile. There, they can review and confirm previously tracked time.

Employee email

We recommend that all employees use their personal email address for their Gusto accounts so they can access their account after they're dismissed. Make sure your employee has their personal email associated with their Gusto account.*
- If their work email used for their Gusto account, remind the employee to update their email address to a personal email address in order to maintain lifetime access* to their W-2 and paystub history.

*Gusto may communicate with dismissed employees about enrollment in federal COBRA or state continuation in the event they lose company-sponsored health insurance coverage, or if other required notices or benefit issues arise. Gusto may provide the employee’s email address to third parties who help facilitate communication about federal COBRA, state continuation coverage, and other benefits. Check out our terms of service for more information about when Gusto shares data with third parties.

*Employees may also receive a notice from their health insurance carrier when their coverage ends, certifying their coverage start and end dates. If an employee contacts their existing carrier directly asking about coverage start and end dates, and the carrier has a processed future termination date on file, the employee is entitled to that information.

*Employees enrolled in life insurance coverage will receive an email from Gusto notifying them of their options to continue or port their life insurance.

Paid time off laws

Some states have laws that require unused paid time off (PTO) be paid out when an employee is dismissed.
Some states do not require the payout of accrued and unused sick leave as a matter of law, but require employers to follow their written PTO policies (including any promise to pay out accrued and unused benefits at the time of dismissal).
Some states do not have any requirements in this regard.

For any scenario, on a dismissal payroll, you'll be able to click the time off hours and determine if the remaining balance should be paid out.

Payment methods

Some states have laws which require dismissed employees to be paid on an accelerated basis. The timing of final wage payments may vary depending on whether an employee is being let go or if they're quitting.

It's important to understand that some states impose penalties for not paying departing employees within the time limits specified by the states’ laws.

Note: Dismissal payrolls will default to a check payment method, which the company will need to issue directly. If you'd like to pay by direct deposit, you'll be asked to acknowledge that you've reviewed your state's laws regarding final payment. Once acknowledged, you can update the payment method by clicking the icon next to Check, and selecting Direct deposit.

We recommend checking with your state’s department of labor (or equivalent) for their specific regulations around timing and method of payment.

Dismissal notifications

These scenarios assume your employee has a dismissal date of the current day or a day in the future. If you're backdating a dismissal, see the "Backdated dismissals" dropdown below.

Payroll only
- If you only use Gusto for payroll, no emails will be sent to your employee indicating they’ve been dismissed.
Payroll and health insurance
- If you use Gusto for payroll and health insurance, your employee will receive a notice letting them know of their right to continue their health insurance coverage via federal COBRA or similar continuation of health benefits under state law.
  - If your employee is eligible for state continuation, they’ll receive an email from Gusto 3 business days after the dismissal date with enrollment information.
  - If your employee is eligible for federal COBRA and your company is not set up with our COBRA TPA BASIC (formerly BASIC Pacific), your employee will receive an email from Gusto 3 business days after the dismissal date with enrollment information.
  - If your employee is eligible for Federal COBRA and your company is set up with our COBRA TPA BASIC (formerly BASIC Pacific), the employee will receive a notice in the mail about their right to continue coverage.
- Employees may also receive a notice from their health insurance carrier when their coverage ends, certifying their coverage start and end dates. If employees contact the carrier directly and asks about their coverage, if the carrier has a future dismissal date on file, the employee is entitled to that info. If you're dismissing the last active employee on your insurance policies, your policies will likely be canceled and continuation (COBRA) coverage will not be available.
Payroll, health insurance, and life insurance
- Employees will receive all notifications detailed in paragraph 2 above, plus employees enrolled in life insurance coverage will receive an email from Gusto notifying them of their options to continue or port their life insurance (a process of taking their life insurance with them). They'll get this email one day after their last day of coverage.
AP Intego, Guideline, commuter benefits, FSA, and HSA
- If you use any of these services, they will not automatically send notifications to your employees upon dismissal.
- If your employee decides to initiate a 401(k) rollover with Guideline, Guideline will send communications to your employee.
Expense submissions
- If an employee with an upcoming dimissal date trys to submit an expense for approval, they'll get this message: "Employee expense could not be save: Offboarding employees cannot create new expenses. Please contact your manager or the payroll admin to process any new expenses."

Backdated dismissals

While we hope that you'll be able to plan for your employee’s dismissal, we understand you may have to backdate a dismissal in what are, hopefully, rare cases. If the backdated dismissal date you need is not available for selection in Gusto, contact us through the Help section of your account so we may assist you in entering the correct date.

All notifications for backdated dismissals are the same as the section above, except for COBRA notifications. Employees with a backdated dismissal date will receive an email notifying them of their eligibility for COBRA one business day after the backdated dismissal date was entered in Gusto.

Keep in mind, when it comes to health insurance, it's industry standard to notify carriers in advance about dismissals, enrollments, and qualifying life events. This makes sure coverage begins and ends correctly. When dismissals are backdated, companies may incur additional charges from their insurance provider(s) to process the retroactive changes and there may be, in some cases, amounts due for employees.

Agency requirements for Separation Notifications

Many states require or recommend employers to provide one of the following to dismissed employees:

Official notices of separation
Service letters that outline their employment details and reason for separation.

Even if your state doesn't require notification(s), it's a good idea to send dismissal letters for documentation purposes—they help demonstrate that the reasons for dismissal were not discriminatory.

Does Gusto help with separation notifications?

Gusto does not provide or submit these notices of separation. For more information, visit your state’s department of labor website for their specific requirements. If you have questions about whether your dismissal process is compliant, consult an employment attorney or labor agency.

Premium customers, or Plus plan customers with the priority support add-on, reach out to the HR Experts by heading to the HR Resources section of your admin profile.

Employees with garnishments

If you’re dismissing an employee with a garnishment, you’ll need to notify the collecting agency—some states require an additional form to be submitted detailing the dismissal. As always, refer to your state’s specific guidelines and requirements.

Deceased employees

In the unfortunate event that an employee passes away, you can dismiss the employee to remove them from your Gusto account. For any questions on how to handle final pay for the deceased employee, you'll need to work with an HR professional or employment lawyer.

If your company's benefits are managed by Gusto, contact us from the Help section of your account so we can work with the carrier to make sure benefits are handled appropriately.

Gusto will still file the employee's W-2 at the end of the year, so long as we're still your payroll provider. More information can be found on the IRS website.

How to dismiss an employee

Dismissals cannot be reversed or canceled, so make sure that you want to end the employee's employment and remove them from future payrolls. Their info will stay in Gusto for your records, taxes, and possible rehiring. If your employee is going on a leave of absence, skip them on payroll instead of dismissing them.

The information below is the same for both employees who voluntarily leave, or who are terminated.

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.
  - 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.

Dismiss an employee

Employees who were paid through Gusto cannot be fully removed from our system for compliance purposes.

Sign in to Gusto.
Click the People section.
Click on the employee's name (green link), not the checkbox.
From the Work tab, find the “Work” section.
Under the start date, click Dismiss.
- To dismiss or rehire a contractor, follow the steps outlined here.
- If you need to dismiss an employee that never started with your company, or a duplicate employee who was accidentally added twice, contact us through the Help section of your account.
Enter the employee’s last day.
Let us know if the employee chose to leave.
- We will not report this anywhere, but we’ll record it for you in case you need to use it later.
Select a reason for dismissal (optional).
- We will not report this anywhere, but we’ll record it for you in case you need to use it later.
Enter their personal email address (optional)—this is the email they’ll use to sign in to Gusto later for W-2 forms.
Enter any dismissal notes (optional).
- Only admins with the required permissions will see these notes.
Click Save & continue.
Review the dismissal timeline and expectations and dismiss the employee (or schedule a future dismissal).
If everything looks good, click Dismiss employee.
Once dismissed, work through the offboarding checklist—you can complete the checklist at a later time from the Offboarding tab on the employee's profile.

We understand this can be a sensitive matter. Once you've entered the dismissal details, no notifications will be sent to employees regarding their status change.

If the dismissal needs to be removed for any reason, contact us through the Help section of your account.

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 1/15/2025.

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	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.	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. 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.

Furlough employees

Furlough is when an employee is placed on a temporary, unpaid leave at the request of the employer. An employer would place an employee on furlough when they do not need them to work for a specific period of time—like a downturn in business, or seasonal demands—but the employee is expected to return at a later date.

Other leaves of absence only differ in that they’re based on the employee’s request—for personal and/or medical reasons—instead of the employer requesting the leave.

How to handle a furloughed employee in Gusto

Furlough and leaves of absence are handled the same way through Gusto. Instead of dismissing the employee, you'll need to skip them on payroll to "furlough" the employee until they return to work.

You'll see the usual per employee charge on your invoice for this individual—skipping them on payroll(s) does not change the price per employee.

Furloughed employees who have benefits with Gusto

Skipping an employee’s payroll (ex. placing them on furlough), will not terminate their benefits. However, carriers’ rules differ—to be compliant, reach out to your carrier to find out how long an employee can keep their health benefits while they're not actively working.

Once an employee returns to work and is paid through payroll, we’ll apply catch-up deductions to capture the deductions that were missed when payroll was not run for that employee. During the months that the employee is on furlough/leave, the employer is still responsible for paying the entire health insurance invoice to the carrier. This means that you’ll be covering the employee’s portion of the premium until we’re able to reinstate deductions upon the employee’s return.

COVID-19 and carrier flexibility

Some carriers are loosening their requirements on furloughs and insurance premiums in light of the impact COVID-19 is having on small businesses. Reach out to your carrier to find out how long an employee may be placed on furlough/leave while continuing insurance coverage, and if they’re offering options on premium invoice deferrals during this time. To read about the difference between dismissing an employee and placing them on furlough/leave of absence, read this article.

Dismissing or laying off an employee

If an employee is not being furloughed, and will not be coming back to the company, follow the steps to dismiss them.

Change dismissal details

You can change the dismissal details up until the original dismissal date has passed. After the dismissal date, you can still update some dismissal details, but only if the employee has not been paid since then.

If you cannot change the dismissal date or details on your own, contact us from the Help section of your account.

Change dismissal details

Sign in to Gusto.
Click the People section.
Click on the employee's name (green link), not the checkbox.
From the Work tab, find the “Work” section.
In the gray "Pending" box, select Edit.
Change the relevant information.
Click Save.

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.
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.

Rehire a dismissed employee

Admins with the required permissions can rehire a dismissed employee in their admin Gusto account. If you do not see the option to rehire an employee, reach out to the primary admin of your company.

Reminders

Gusto does not ask for a new I-9 for rehired employees.
When you rehire an employee, their original hire date will be replaced with the rehire date.
If rehired within the same year, they'll only receive one W-2 for all wages earned.
Rehires cannot be canceled or undone—if you did not mean to rehire an employee, you'll need to follow the steps to dismiss them again.
You cannot rehire an employee as a contractor, you'll need to add them as a contractor instead.

To convert a contractor to an employee, follow the steps in this article.

Rehire a dismissed or former employee

At this time, sending new hire or offer letters to rehired employees is not supported.

Sign in to Gusto.
Click the People section.
Select the Dismissed tab.
Click on the employee's name (green link), not the checkbox.
On the Work tab, scroll to the "Work" section and click + Rehire under "Dismissal details".
- If you're rehiring an employee that worked at your company before you joined Gusto, click Get started to add their info.
Enter your employee's rehire date.
Choose their employment status from the dropdown.
Select your employee's work location.
Select whether if you'd like us to file a new hire report.
Click Rehire Employee.

Once you rehire the employee, they can sign in to their existing Gusto account to confirm their information is still accurate, or update it if needed.

The employee will become active in Gusto on the rehire date, and they'll be added back on the payroll. If you rehired an employee that left before joining Gusto, you'll be asked to fill out a few more details on the rehire date to add them as a new active worker.

Change a rehire date

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

Dismiss and rehire employees

Dismiss an employee

State

Dismissal paycheck deadline(s)

How to handle a furloughed employee in Gusto

Furloughed employees who have benefits with Gusto

COVID-19 and carrier flexibility

Dismissing or laying off an employee

Change dismissal details

Rehire a dismissed or former employee

Change a rehire date