Definitions of key terms used in state payroll compliance laws. This glossary serves as an authoritative reference for HR and payroll professionals.
Penalties imposed on employers who fail to pay final wages within the legally required timeframe. These penalties typically accumulate daily until payment is made and can amount to significant additional wages (often up to 30 days' wages) that must be paid to the employee in addition to the original wages owed.
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The last payment owed to an employee when their employment ends, including all wages earned up to the termination date and any other amounts required by state law (such as accrued vacation time, commissions, bonuses, or unused sick leave). The deadline for issuing final paychecks varies by state.
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Vacation time that an employee has earned but not yet used. In some states, employers must pay out accrued, unused vacation time when an employee leaves the company. Other states allow employers to have "use-it-or-lose-it" policies, but this varies significantly by jurisdiction.
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A company policy that requires employees to use their vacation time within a certain period (typically a year) or forfeit it. Not all states allow these policies—some states require that all accrued vacation time be treated as earned wages that must be paid out upon termination regardless of company policy.
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Payment of final wages due to an employee upon termination of employment. This includes regular wages earned, accrued vacation (where required by state law), commissions, bonuses, and other compensation owed. The timing requirements for termination pay vary significantly by state.
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When an employee voluntarily quits or resigns from their position. Many states have different final paycheck deadlines for voluntary resignations versus involuntary terminations (firings or layoffs). Typically, voluntary resignations allow employers more time to issue final pay.
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When employment ends due to actions by the employer, such as firing or layoffs. Most states require faster final paycheck payment for involuntary terminations—often immediately, the same day, or within 24-72 hours—compared to voluntary resignations.
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Payment of unused, accrued vacation time to an employee upon termination. State laws vary: some states require employers to pay out all accrued vacation, some only require payout if company policy promises it, and some states don't require payout at all.
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A unified time-off benefit that combines vacation, sick leave, and personal days into a single pool of paid time off. Most states treat PTO the same as traditional vacation time when it comes to payout requirements, but some states have specific distinctions between "earned" and "granted" time off.
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Payment of unused PTO (Paid Time Off) to an employee upon termination. Generally treated the same as vacation payout under state law, meaning the same rules that apply to vacation payout typically apply to PTO payout.
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A holiday that an employee can take on a day of their choosing rather than a fixed date. Floating holidays are typically treated the same as vacation time under state payout laws—if a state requires vacation payout, floating holidays are usually included in that requirement.
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Paid time off that employees can use for personal reasons. Like floating holidays, personal days are generally treated the same as vacation time under state payout laws and are subject to the same payout requirements upon termination.
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In the context of final paycheck laws, wages include all compensation owed to an employee: regular hourly or salary pay, overtime, commissions, bonuses, accrued vacation/PTO (where required), and any other earned compensation. The definition can vary by state statute.
Wages that an employee has already earned through work performed, even if payment is deferred to a future pay period. Most states consider accrued vacation time as earned wages if it was promised or accrued, making it subject to final paycheck payout requirements.
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The employer's standard, recurring payday (e.g., bi-weekly, monthly). Some states allow employers to pay final wages on the next regular payday if the termination occurs between pay periods, while others require immediate or expedited payment regardless of regular payday schedules.
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Note: This glossary provides general definitions for educational purposes. State laws can vary significantly, and this information is not a substitute for professional legal or HR advice. Always consult your state's specific regulations and consider consulting with a qualified attorney or HR professional for advice specific to your situation.