According to the Consumer Protection Act and Unclaimed Property Act of 1954, the wages that are unclaimed by their original owners need to be followed up by the payroll professionals and over a period of time according to the laws must be reported to the state government.
Every state has its own different laws, specifically the time period that the wage is considered an abandoned wage. Usually, in most states, you are required to wait for a period of 1 year before you submit the report for an abandoned wage to the government. This report must be submitted before the 1st of November each year and not after.
Who owns the unclaimed wages?
Payroll professionals are well aware of the fact that the wage that has been approved to pay off to the employee for the work already done, is no longer the company’s property. The company is only keeping the wage until the owner claims it. And according to the law, if the owner does not claim it within the time limit, the wage would be considered abandoned and submitted to the government.
The abandoned wages and properties submitted to the government will be considered the government’s property until the real owner is found or claims to get their wages or properties back. The state will invest in the abandoned wage and profit from it in the meantime.
What are the reasons for unclaimed wages?
Sometimes, employees might have personal life challenges due to which they can’t collect the amount on time or cash out their cheques, giving them the time allowed by the state laws and also reminding them through letters or the company’s extra effort to reach them out can solve the problem and might not reach out to the point of submitting the report for abandoned wages. In some cases, the employees might have lost the cheques, so it’s the company’s responsibility to issue a new cheque for their wages.
What happens if you fail to report unclaimed wages?
The failure to handle unclaimed wages and submit reports on time has its own consequences according to the law. Payroll professionals are required to be well reversed with the state laws and the laws of the state the employees are from, to have a good knowledge of the procedure and understanding of the steps to follow. Failure to comply with the laws can cost the company heavy fines and also payroll audits. Most of the time, government agencies hire a third-party company to run an audit on your payroll department. This basically means the audit might vary from the report you have submitted and might lead to more red flags and penalties. To avoid all such complications, it’s crucial to follow the steps to handle abandoned wages appropriately.
What is considered necessary for reporting unclaimed wages?
Almost all states require employers to send a due diligence letter to the employee whose payment is approved by the company but has not yet been picked up. Or have been given the cheque, which is not yet deposited. This due diligence letter must be sent to the employee’s last known address according to the company records. Employers must wait for the duration of about 6 months to 1 year before they can submit the report for abandoned wages. Remember that a due diligence letter is a requirement for reporting abandoned wages since it proves that the company has already tried to reach out to the employee whose wage is pending. This ensures the government that the employee has been reached out to and that efforts have been made through the company’s end. It’s also important to note that the due diligence letter must not be sent after 120 days of not claiming the wage or before 60 days.
During the procedures, employers can take extra steps such as contacting a friend, calling on personal numbers, etc, to reach out to the employee whose wage is pending and ask them to collect their unclaimed wage. This is because most employers would rather contact the employee and pay them the amount than submit it to the government.
Final Words
To avoid such complicated situations and stay clean on this, make an effort to make straightforward efforts for the payment of employees. Paying directly on the employee’s account or through pay on a card, the wage will no longer be counted as an abandoned wage.
