Question: When an employee dies, how should payment of wages and accrued benefits to survivors be processed and reported?
Answer: The death of an employee involves several issues related to payroll that must be handled correctly. While employee death may be a rare event for a particular employer, it is not unusual. It is best that payroll identify the issues and prepare a procedure for payroll personnel to follow in the event of an employee’s death.
This is particularly important with respect to the immediate release of funds to a spouse or other survivors. Most states have rules under wage and hour or probate law that specify when such payments are to be made, who may be paid, how much may be paid and whether certain documentation must be obtained before payment is made.
These laws vary by state, and some states do not have specific rules related to deceased employee wages. A best practice is for employers to determine the state laws that apply and establish procedures that comply with the relevant laws.
For example, Ohio allows an employer to pay earnings of up to $5,000 to a deceased employee’s survivors in order of preference – including a surviving spouse, children aged 18 or older, or a parent – without requiring a release from the estate’s executor or the Department of Taxation.
California, in contrast, allows employers to pay up to $16,625 net. However, the payments may be directed only to a surviving spouse, who must submit an affidavit as specified in the probate...
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