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Do you know the rules of termination?


It is overwhelming when you decide to terminate an employee or contractor. To make the process run smoother, you must have your bookkeeping in order. Do you know the steps to take when you are faced with this decision? Below are tips from the American Institute of Professional Bookkeeping:

Regardless of the termination reason, you must provide the following:


1. Final Paycheck

Final wages must be paid as determined by state law, not federal law. Oblige by one of the following:

  • The next regular payday

  • Within said specified number of days of the employee/contractor’s last day

  • The final day of work. -It is important to note that some states impose financial penalties for violating their rules. If there are no special state (or local) rules, try to use your firm’s normal paycheck distribution method.

  • If an employee/contractor disappears, you must send the final paycheck to the last known address via direct deposit or paycard. If a final payment is returned as undeliverable, hold on to it and wait for the employee to contact you. - If an employee/contractor disappears, you must send the final paycheck to the last known address via direct deposit or paycard. If a final payment is returned as undeliverable, hold on to it and wait for the employee to contact you. * It is important to get to know your state’s regulations on unclaimed property. If wages become abandoned, they must be turned over to the state.

2. Final W-2 Provide the W-2 by the normal deadline at the address you have on file for said employee/contractor.



3. Perform an Exit Interview If possible, conduct an exit interview to confirm that the contact information on file, is correct. If it isn’t, make sure to update during the exit interview.


4. Take Preventative Measures for the Future It pays to have written policies in place requiring employees/contractors to notify your firm of any change in contact information, beneficiary designations and other important information. Remember, you want this process to go smooth, quick and easy!






📸 Mastuh Abootalebi for Unsplash

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