It has often been stated that a company’s most important asset is its employees. Therefore, it can easily be said that taking care of those employees ought to be the company’s first priority. Payroll is a key element of taking good care of employees. But what happens if employee payroll checks aren’t cashed?
What is Payroll, and Why is it Important?
Payroll encompasses all the processes that fairly compensate an employee for his/her labor, including hours worked, the agreed-upon compensation, and the distribution of payments. It also includes the accounting functions of recording the payroll and providing other compensation such as bonuses, sick time, vacation pay, withholding taxes, Medicare, and Social Security.
Payroll is important because it is a major factor in an employee’s morale and a company’s reputation. Payroll practices must be compliant with tax and employment legislation and with required government reporting. Fair, accurate, consistent, and timely payroll is important, but problems and extra efforts are required when employees’ payroll checks aren’t cashed.
What Happens When Employees’ Payroll Checks Aren’t Cashed?
When an employee’s check is not cashed, an employer is responsible for reporting the check to the state and turning it over to the state after a state-defined time period. An uncashed check is treated as abandoned property under state escheatment laws. The state government then takes ownership of the check and holds the funds until the check owner or an heir makes a claim. The steps require that first, an employer must make diligent efforts to contact each employee (including former employees) by phone or written notice regarding the uncashed check. It is important to document all contact attempts. Second, it is critical to check stake regulations to identify the check abandonment period and the timeframe for reporting the uncashed check. Then, act appropriately during the period indicated. Third, the company must keep the funds available and not return the payroll funds to the company’s checking account. Fourth, the company must not void the check. Companies can be fined if they don’t turn the check over to the state, even if the employee can’t be found.
To avoid problems when payroll checks aren’t cashed, companies should monitor their books with monthly reconciliations, have a firm policy to follow up on outstanding checks after a defined time, maintain good employee records, including contact information, and offer direct payroll deposits.
Best Payroll Practices
Consider these best payroll practices to enhance employee attitudes and motivation and to avoid problems when payroll checks aren’t cashed:
- Have well-established payroll policies and communicate them clearly to employees.
- Keep accurate records and always verify that employees are classified correctly.
- Have a payroll calendar and keep track of important deadlines.
- Have a reliable time and attendance system.
- Ensure payroll data accuracy.
- Regularly perform payroll audits and regularly reconcile payroll accounts.
- Be fully compliant with all employee compensation regulations.
- Ensure that you have expert payroll services.
Choose an Expert Payroll Service
Choose an expert payroll service, Palmetto Payroll, to assist you with your payroll system. We have offices in Columbia and Charleston, serving over 300 business owners statewide and growing. We offer tailored solutions to save you time and money so you can thrive and grow, including payroll, tax depositing and filing, management reporting, Human Resource Services, and timekeeping services.
