How to pay out a terminated employee mid-pay period

Question

How do I pay out a terminated employee with Daily Tip Pooling mid-pay period without affecting the remaining tip pool calculations?

Answer

Yes. You can pay a terminated employee mid-pay period while keeping the Daily Tip Pooling calculations accurate. This requires processing the employee’s final pay through an off-cycle payroll and locking their punches before the pool recalculates.

1. Confirm that all time punches for the terminated employee, and all other employees in the tip pool are accurate for the period up to the termination date. Avoid editing punches afterward, as this will cause the tip pool to recalculate and may result in an underpayment/overpayment.
2. Process an off-cycle payroll specifically for the terminated employee, including their wages and their accrued tips up to their last day of employment.
3. Set the employee’s termination date. Update their profile immediately after the off-cycle payroll is processed. This ensures they stop accruing tips for any remaining days in the period.
4. Regular Payroll Cleanup: When you run your regular end-of-period payroll (in 10 days), the terminated employee may still appear in the draft because they had hours during the full pay period. You must manually delete their entry from the regular payroll draft to prevent overpayment, as they have already received their final check.

By following this process, the tips paid out to the terminated employee are accounted for and excluded from future calculations, and the subsequent tip pool distribution for the remaining employees will be accurate based on their hours worked.