To calculate the final paycheck for a salaried employee, convert the annual salary to a daily rate by dividing by 260 workdays, multiply that rate by the days actually worked in the final pay period, and then add any required payout of unused vacation before applying tax withholding and lawful deductions. For someone earning $65,000 a year, the daily rate is $250, so four days of work in the last period produces $1,000 in gross base pay. The arithmetic is simple. The rules around what has to be included, how the lump-sum vacation payout is taxed, and when the money must arrive are where most mistakes happen.
Information to Gather Before You Calculate
Pull these together first:
- Gross annual salary from the employment agreement or most recent pay stub.
- The start and end dates of the current pay cycle, plus the employee’s last day of work.
- The number of business days the employee actually worked (or was on paid status) between the start of the period and separation.
- The balance of accrued unused vacation or PTO hours on the most recent payroll statement.
- Any outstanding items the employer plans to withhold, such as salary advances, benefit overpayments, or equipment charges.
Two constants do most of the work: 260 workdays per year (52 weeks × 5 days) and 2,080 work hours per year (52 weeks × 40 hours). Both assume a standard Monday-through-Friday, 40-hour schedule, and the IRS uses 2,080 hours as the baseline for full-time equivalent calculations.
Converting Annual Salary to a Daily Rate
Divide the annual salary by 260 to get a daily rate. A $65,000 salary divided by 260 workdays equals exactly $250 per day. Multiply the daily rate by the days worked in the final pay period to get the gross base pay owed.
The weekly method reaches the same result. Divide $65,000 by 52 weeks to get $1,250 per week, then divide by 5 to get $250 per day. Four days worked in a ten-day biweekly cycle at $250 per day comes to $1,000 in prorated salary.
Why Proration Is Allowed in the Final Week
Exempt salaried employees normally get their full weekly salary regardless of hours worked, and deducting for partial-day absences ordinarily violates the salary basis test. The exception is the first and last week of employment. Federal regulations allow an employer to pay only a proportionate share of the weekly salary for time actually worked during the terminal week, using an hourly or daily equivalent of the full salary.1eCFR. 29 CFR 541.602 – Salary Basis That is the rule that makes daily proration on a final check legal.
If the Employee Is Salaried but Non-Exempt
Not every salaried employee is exempt from overtime. To qualify for the executive, administrative, or professional exemptions, an employee must earn at least $684 per week ($35,568 annualized) and perform duties that meet specific tests.2U.S. Department of Labor. Fact Sheet 17A – Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees A salaried worker who falls below the threshold, or whose duties don’t qualify, is entitled to overtime at one and a half times the regular rate for hours over 40 in a workweek.
For a non-exempt salaried employee, the regular rate is calculated by dividing the weekly salary by the number of hours the salary is intended to cover.3eCFR. 29 CFR 778.113 – Salaried Employees – General If the final pay period includes any workweek with hours over 40, add the overtime premium to the check. This is the step most often missed by employers who assume “salaried” means “no overtime.”
Adding Unused Vacation to the Check
Convert the annual salary to an hourly rate by dividing by 2,080. A $65,000 salary produces an hourly rate of $31.25. Multiply that by the number of accrued unused vacation hours. An employee with 40 unused hours would be owed an additional $1,250 in gross pay.
Federal law does not require employers to pay out unused vacation. The FLSA treats vacation pay as a matter of agreement between the employer and employee.4U.S. Department of Labor. Vacation Leave The obligation, when one exists, comes from the employer’s own written policy, an employment contract, or state law. Many states treat accrued vacation as earned wages that must be paid at separation; others permit “use it or lose it” policies. Check the employee handbook first, then the applicable state labor department rules. Sick leave and personal days typically follow different rules and are less likely to require payout. Whatever gets paid, itemize the PTO amount separately from prorated wages on the final pay stub so both sides can verify the math.
Tax Withholding on the Final Check
The prorated base salary is taxed like a normal payroll run. Federal income tax is withheld based on the W-4, and FICA applies at the usual rates: 6.2% for Social Security on earnings up to $184,500 in 2026, and 1.45% for Medicare with no cap.5Social Security Administration. Contribution and Benefit Base State and local income taxes come out under the applicable jurisdiction’s rules.
A lump-sum vacation payout is handled differently. The IRS treats a one-time payment for accrued leave as supplemental wages, and the employer has two options for federal income tax withholding: add it to the regular wages and withhold on the combined total using the W-4, or withhold a flat 22%. The flat rate is simpler for payroll but can over- or under-withhold depending on the employee’s actual bracket. Either way, the PTO payout is still subject to Social Security and Medicare on top of the income tax withholding.6Internal Revenue Service. Publication 15 (2026), Employer’s Tax Guide Any over-withholding gets reconciled when the employee files the annual return.
Deductions and Garnishments
Employers sometimes offset the final check for unreturned equipment, salary advances, or benefit premium overpayments. Federal law permits these deductions with one hard floor: they cannot push the employee’s effective pay below the federal minimum wage for the hours worked.7eCFR. 29 CFR 4.168 – Wage Payments – Deductions From Wages Paid Many states go further, requiring written authorization for any deduction or banning equipment-related deductions outright. Deducting $800 for a lost laptop from a $900 final check can easily cross a state-law line.
Active wage garnishments still apply to the final check. For ordinary consumer debts, the garnishment cannot exceed the lesser of 25% of disposable earnings or the amount by which those earnings exceed 30 times the federal minimum wage. Child support orders allow larger withholdings, up to 50% or 60% of disposable earnings depending on whether the employee supports other dependents.8U.S. Department of Labor. Fact Sheet 30 – Wage Garnishment Protections of the Consumer Credit Protection Act
A Full Worked Example
An employee earning $65,000 per year is terminated on a Wednesday after working three days of a ten-day biweekly pay period. The employer’s policy requires paying out the employee’s 40 hours of unused vacation.
- Daily rate: $65,000 ÷ 260 = $250
- Prorated base pay: $250 × 3 days = $750
- PTO payout: $65,000 ÷ 2,080 = $31.25 per hour × 40 hours = $1,250
- Gross final pay before withholding and deductions: $750 + $1,250 = $2,000
From that $2,000, the employer withholds federal income tax on the $750 using the W-4 method, withholds federal income tax on the $1,250 PTO payout at either the W-4 rate or a flat 22% ($275), and withholds FICA at 7.65% on the full $2,000 ($153). State income tax and any active garnishment orders come out after that. The net deposit is whatever remains.
When the Check Must Be Delivered
Federal law does not require an employer to hand over the final paycheck immediately.9U.S. Department of Labor. Last Paycheck Timing comes from state law, and the range is wide. Some states require same-day payment when an employee is fired; others let employers wait until the next regularly scheduled payday. Deadlines also differ between involuntary terminations and voluntary resignations, and employees who quit generally get a longer window than those who are discharged.
Delivery usually happens through the same method the employee was already receiving pay, whether direct deposit or paper check, though some states require employers to stop automatic deposits at termination and issue payment another way. If the regular payday for the last pay period has passed with no payment, the U.S. Department of Labor’s Wage and Hour Division or the state labor department can assist.
Penalties for Late or Missing Final Pay
Exposure for late payment grows quickly. Under the FLSA, an employer who fails to pay wages owed under federal minimum wage or overtime provisions is liable for the unpaid amount plus an equal amount in liquidated damages, effectively doubling the bill, along with reasonable attorney fees.10Office of the Law Revision Counsel. 29 USC 216 – Penalties That federal remedy applies to minimum wage and overtime violations, not every final pay dispute.
State penalties are often broader. Several states impose waiting-time penalties that accrue at the employee’s daily wage rate for every day the final check is late, sometimes for up to 30 days. Others let the employee recover two or three times the unpaid amount through a wage claim. A $2,000 final check that sits undelivered for a month can cost the employer many times that in penalties. The calculation matters. So does getting the check out on time.