This employee owes money for prepaid commission and equipment, and signed an authorization to acknowledge the debt. The employee worked 8 hours and has 50 hours accrued vacation. To collect about the entire debt, we want to issue a final paycheck and deduct an amount equal to the net pay. Also, we thought that we should not do a final paycheck but instead to perform books adjustments. How is correct to proceed?
Final paycheck when the employee owes money to company
Answers
Please stop and check with a labor attorney in your state. Every state is different in how they require employers to treat employees on the last day. The subtle differences can bite you.
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Completely agree with Regis. Stop and check with a labor lawyer. Even though you have the signed authorization, etc., some states forbid the netting of advances, equipment loans, and the like against final paychecks. These states insist that you collect the amount owed in the same manner you would collect any other debt.
I would add that your thought of doing just book entries sounds wrong. The employee's W-2 would need to include his gross wages including the 8 hours worked and the vacation paid out, as well as
Agree that depending on state labor laws, unless the employee has signed a statment agreeing to repay any final debts to the company via payroll deduction, it's best to treat these as separate transactions and not net them.
You can also check your states DOL website. The rules will be spelled out on the website at least for NC it is. The laws are wordy and tricky so I do agree consulting a professional is the best case. You can always contact the DOL as well. We had an issue arise and the person in charge of our case was happy to help. It's very expensive if you are found non compliant!
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Human Capital