Final Paycheck & Benefits Checklist

Compute the employee's prorated salary or hourly wages for the final pay period, accounting for any partial days worked and ensuring accuracy against the employee's timesheet or attendance records.

Calculate the total number of accrued but unused vacation and PTO hours based on the company's accrual policy and state law requirements. Multiply by the employee's regular hourly rate to determine the payout amount.

Review timesheets for the final pay period and any prior periods for unpaid overtime, shift differentials, weekend premiums, or holiday pay that the employee earned but has not yet received.

Determine whether the employee is entitled to a pro-rated portion of any pending bonuses, commissions, or incentive payments based on their employment agreement, company policy, and achievement of performance targets.

Review the employee's payroll records for any outstanding salary advances, equipment loans, tuition reimbursement clawbacks, or other authorized deductions that should be applied to the final paycheck.

Research and comply with the employee's state of employment laws regarding final paycheck timing, as requirements vary from immediate payment upon termination to the next regular pay date depending on jurisdiction.

Confirm the exact date the employee's health, dental, and vision insurance coverage will end based on the company's policy, whether coverage terminates on the last day worked, end of the month, or another date.

Generate the COBRA election notice and mail it to the employee within the legally required 14-day window. Include the coverage options, monthly premium costs, election deadline, and instructions for enrollment.

Notify the insurance carriers of the employee's termination date and provide the employee with information about any portability or conversion options for their group life and disability insurance policies.

Provide the employee with their current FSA balance and the deadline for submitting eligible claims incurred before the termination date. For HSA accounts, confirm the balance remains accessible to the employee.

Process the termination of the employee's dental and vision benefits, coordinate any COBRA continuation for these plans, and ensure the benefits administration system reflects the correct end dates.

Send the employee a statement of their 401(k) account balance, including both vested and unvested portions. Explain the vesting schedule and how unvested employer contributions will be handled upon departure.

Provide the employee with clear information about their options for the retirement account, including rollover to a new employer plan, rollover to an IRA, leaving the funds in the current plan, or taking a distribution along with the tax consequences of each option.

Review the employee's equity compensation agreements to determine the status of vested stock options, restricted stock units, or ESPP shares. Communicate exercise deadlines and any acceleration or forfeiture provisions.

Stop all employer matching contributions, profit sharing allocations, and any other employer-funded retirement plan contributions as of the employee's separation date. Update the plan administrator accordingly.

Issue all legally required retirement plan notices, including the special tax notice for distributions, the automatic rollover notice for small balances, and any plan-specific distribution election forms.

Verify that the year-to-date earnings, taxes withheld, benefits contributions, and any taxable fringe benefits are correctly reflected and will be accurately captured on the employee's W-2 form.

For employees who worked in multiple states during the tax year, ensure proper allocation of wages and tax withholdings across all applicable state tax returns and that reciprocity agreements are correctly applied.

Confirm the employee's current mailing address for delivery of the W-2 and any other year-end tax documents. If the employee has signed up for electronic delivery, verify their access will remain active.

Process severance payments with proper federal and state tax withholdings, including supplemental wage withholding rates where applicable. Ensure the severance is reported in the correct tax year.

Complete and file any state-mandated final pay reports, separation notices, or wage documentation required by the employee's state of employment. Retain copies in the employee's payroll file.

Archive all final pay documentation, including calculations, approvals, payment records, and tax filings in accordance with federal and state record retention requirements, typically a minimum of three to seven years.

Deliver the final pay stub showing gross pay, all deductions, taxes withheld, and net pay to the employee electronically or by mail based on their delivery preference and state requirements.

Deactivate the employee's payroll record, ensuring the final payment has been processed, all deductions are reconciled, and the profile is marked as terminated with the correct separation date and reason.

Record any disagreements about final pay calculations, special payment arrangements for commission or bonus true-ups, or deferred payment agreements in the employee's payroll file for future reference.

Have the payroll coordinator sign the final payroll offboarding checklist confirming all payments have been processed, benefits have been properly terminated, and all documentation has been filed correctly.