Offboarding: From a Payroll and Benefits Perspective

Jennifer L'Estrange
January 21, 2022

People leave their jobs – it is a natural part of the employee life cycle. It is essential to understand and be prepared for the entire employee life cycle, including offboarding. Organizations can be prepared for inevitable exits by having a thorough offboarding process in place, which will alleviate the stress that accompanies an employee separation. Pressure and tension will occur regardless of whether an employee has resigned from their position, or has been terminated. Although, many organizations end up overlooking or forgetting one of the most critical aspects in an employee exit: to offboard employees from a payroll and benefits perspective.

The Importance of Offboarding

Offboarding an employee that is leaving the company is just as important as onboarding an employee who is joining the company. When navigating through the exit process, employers should always keep company culture and employee experience at the forefront so the employee can exit the organization on good terms.

The offboarding process should ensure that there are no loose ends after an employee leaves. Steps should include:

  1. A knowledge transfer – should occur during the transition period. All identified responsibilities should be assigned to another employee to ensure that there will be business continuity. 
  2. An exit interview – should be conducted during an employee’s final week. This gives the employee an opportunity to provide honest counsel around why they are leaving, their experience at the company, and feedback about their manager. This feedback should be utilized to improve organizations.
  3. Removal of employee accesses – At the end of an employee’s final day, access to their company email and any job-specific accounts and software should be terminated to protect the company’s confidential information and privacy.
  4. Return company assets – Any assets that were provided to an employee to use during their employment should be returned to the company. If working remotely, provide the employee with shipping instructions and a location to return the items to. 

Organizations should create an offboarding checklist to follow in order to guarantee that every aspect of the process is executed correctly and in a timely manner.

The Offboarding Process For Payroll and Benefits 

The final step in the offboarding process is providing the departing employee with important details about the status of their final pay and benefit enrollments, as well as remembering to remove them from payroll and the benefits plan. Many organizations accidentally forget this step – which will ultimately cause financial impacts.

Offboarding Payroll

It is important to outline information surrounding an employee’s final pay. Employers should be prepared to answer the following questions:

  1. How many working days will be reflected in the final paycheck? 
  2. When will the final paycheck be given to the employee?
  3. Will vacation/PTO be paid out? If so, how many days?

When offboarding an employee, employers should ensure that they have the correct data for the above questions, and enter them accordingly for the employee’s final paycheck. Additionally, while it sounds simple, employers need to verify that employees are terminated in the payroll system. This step is often overlooked and as a result, terminated employees will continue to be paid their regular salary because their automatic pay has not been canceled.

Offboarding Benefits

The status of an employee’s benefits is one of the most concerning aspects to employees when changing or leaving a job. It is critical that an employer provides all of the information an employee may need to know about their benefits package when exiting the organization:

  1. When does an employee’s medical/dental/vision benefits expire?
  2. How does an employee register for COBRA or state continuation benefits?
  3. What date does an employee’s disability coverage end?
  4. When do auxiliary benefits expire?
  5. What happens to an employee’s 401K? What are their options?

When offboarding an employee, it is essential to communicate this information to the employee, as well as to a benefits administrator so benefits can be terminated accurately. If this information is not communicated in a timely manner and to the correct person, the employer may, as a result, end up continuing to pay for the departing employee’s benefits. 

Employers can create an exit packet that outlines the employee’s final paycheck and all necessary cessation of benefits information. Exit packets should be prepared and sent to an employee in advance of their final day and reviewed during the exit interview. When working with an HR consultant, they can ensure that the company’s offboarding process is documented as well as ensure that all steps are executed correctly, including accurately offboarding an employee from the payroll and benefits functions.

Who Can Help With Offboarding?

If you are a business leader struggling to manage your payroll and benefits function, you may want to consider outsourcing your department or obtaining additional support from an external consultant. Red Clover consultants have the experience to manage and/or support not only a human resources function but also a payroll and benefits function. Our services can be custom designed to meet the needs of your organization.

The Red Clover team of HR consultants are prepared to roll up their sleeves and run the department, support the existing department and/or build out the function’s strategy – and will ensure that an employee is off-boarded the proper way – including from payroll and benefits. Contact us today to begin the discussion on how we can support your business.

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