October 4, 2023
First major Massachusetts tax cut in over a decade: Top 5 Things You Need to Know
After months of negotiations, the Massachusetts state legislature has finally agreed to pass a tax package that provides…Read More
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Posted on June 13, 2022
The death of an employee causes terrible shock and sadness in the workplace.
The employer will be tasked initially with sharing the news with its workforce, customers and clients, and others with whom the employee interacted. The employer should consider making counseling available to employees, possibly through its employee assistance plan or a local hospice. Some employees may need time away from work to process their grief.
The employer will also have to deal with the practical matter of reassigning the deceased employee’s work. Phone calls and emails will have to be rerouted to others.
Once funeral arrangements are made, the employer should allow employees to pay their respects by providing time off notwithstanding the fact that the company’s bereavement policy is probably not applicable in this situation. Smaller organizations might consider closing during the services to allow employees to attend. The employer might contribute to an existing fund to support the employee’s family or a designated charity and might also establish a tribute in the employee’s honor.
At an appropriate interval, the employer should follow its termination checklist for the return of any equipment such as laptop, keys, ID card, credit cards, or other items. Continued communication with the family or other survivors is key to handling these housekeeping matters with sensitivity. Some families may want to return company property and collect the employee’s personal effects in person. Others may wish to arrange for delivery or pickup of the items.
As the organization honors the deceased and adjusts to work without the colleague, the Human Resources Department has the grim task of tying up the business end of the employee’s pay, taxes and benefits.
Assuming wages are owed to the employee at the time of death, the employer will issue a check to the estate of the employee. For employees paid by direct deposit, the employer should stop the payment from going into the employee’s bank account. If a check is already prepared, it should be cancelled and reissued to the correct payee and with adjusted deductions (see below).
Final payment must include any accrued but unused vacation or paid time off but does not have to include sick time. If there is a deficit of vacation time, it can be deducted but the employer may choose to overlook it.
Massachusetts does not allow payment to the spouse or other relative of the employee absent their designation as personal representative (executor) of the estate. However, there is an exception allowing the employer to pay $100 for an employee who dies without a will. This is problematic for a family if the employee’s wages are the sole or primary source of the family’s income. The employer should make the family aware of this constraint and may wish to offer interim financial support if possible.
Note that the famously strict Massachusetts law governing final wage payment is silent on the issue of timing of pay of a deceased employee. The employer should issue the check as soon as the correct payee has been identified.
Federal income tax does not need to be withheld from the employee’s pay. Wages paid in the same year as the employee’s death are subject to withholding for taxes under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). If the payment is made in the following year, FICA and FUTA do not need to be withheld. The employer will issue a Form 1099-MISC to the estate for the payment, with “other income” listed in Box 3 for the gross amount paid.
Surviving members often do not know where to begin to address benefits. The employer can be of assistance to the employee’s survivors in transitioning these benefits by providing contact information, claim forms, etc.
The employer should determine the number of death certificates that will be required to process claims and transfer balances for these benefits. In Massachusetts anyone can request copies of death certificates from the clerk of the municipality in which the death occurred.
Working with the family of a deceased employee to attend to these matters will require a great deal of compassion, and each case will be different.
AIM members with questions about this or any other human resources issue may call the AIM Employer Hotline at 800-470-6277.