Payment of Wages

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Federal

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Author: Ryan F. Donovan

Summary

  • Employers must comply with both federal and state law when paying employees. The Fair Labor Standards Act (FLSA) only generally requires that employees be paid by their regular payday. The vast majority of the wage payment laws and regulations are at the state level and they are more specific than the FLSA. See General Considerations.
  • Employees may be paid in cash or its equivalent, such as a check, by direct deposit, or with electronic paycards. Many variables must be considered when deciding which method to use to pay employees. See General Considerations.
  • If paying by cash or check, states generally require that employees be able to cash their paychecks for face value without charge or discount at a financial institution that is close to where they work or live. Because of inherent risks of paying employees by cash or check, employers should take certain precautions if using this wage payment method. See Payment by Cash or Check.
  • Direct deposit allows employers to deposit employees' pay directly into bank accounts designated by the employees without using a physical paycheck. Paying employees via direct deposit eliminates many of the problems associated with paying by cash or check. Direct deposit is regulated by both federal and state law. See Payment by Direct Deposit.
  • Electronic paycards are an alternative wage payment option for employees who do not have, or cannot obtain, a bank account that can receive direct deposits. As many as one in 10 employees cannot be paid via direct deposit. Paycards are regulated by federal laws that are similar to the direct deposit laws, as well as by state laws, although the state laws have been emerging slowly. See Payment by Electronic Paycard.
  • HR and payroll departments need to know ahead of time whether there will be an extra pay period caused by the calendar in any given year. If not planned for and handled properly, an extra pay period can cause an unanticipated increase in wage expenses that was not accounted for. See Extra Pay Periods Caused by the Calendar.

State Requirements

The following states have additional requirements for this topic under applicable state law.