Inside Small Business | Small Business & Home Business Marketing

Uncashed Payroll Checks

Charles Read
It may seem highly unlikely, but the problem of what to do with unclaimed checks that are uncashed by employees is an ongoing payroll problem. The problem arises where an employee is discharged or resigns and fails to pick up or claim any wages owed or just does not cash a paycheck for what ever reason.

According to state abandoned property laws, unclaimed wages become a form of “abandoned property” that the employer must pay over to the appropriate state treasury agency if they remain unclaimed for a certain number of years. The period is between six months and seven years depending on your State. The state abandoned property laws governing abandoned property are known as escheat laws, because the property “escheats” or reverts to the state of the last known address of the employee. Every State has such a law.

Most states require employers to contact employees in an attempt to keep unclaimed wages from becoming abandoned property. They are also generally require employers to file annual reports with the state that include each employee’s name, last known address, amount and payment date of the unclaimed wages, and the date of last contact with the employee. If you have employees who had last known addresses in multiple States you will have to deal with each State separately.

You need to check with your State Wage and Hour Agency to find out the details in your State. There is generally no “Statute of Limitations” on unclaimed property meaning if your State audits you they can go back to the very beginning of your business looking for unclaimed paychecks and other “abandoned property.” There can also be interest and penalties depending on the State and circumstances.

So, not only do you have to keep up with your employees wages while they work at your company, you may have to keep up with some of their wages for as long as seven years after they are gone.

Posted on Tuesday, April 8th, 2008 at 7:58 am and is filed under Business, Entrepreneurship, Money/Finance. You can follow any responses to this entry through the RSS 2.0 feed.