Accrued wages are the earnings you’ve worked for but haven’t been paid yet. Because payroll runs on a schedule while you earn money every day you work, a gap always exists between the last hour you put in and the next check that lands. Everything in that gap is accrued. It’s a real debt your employer owes you, and federal and state laws set the rules for when it has to be paid, what can be taken out of it, and what happens if it isn’t paid at all.
What Counts as Accrued Wages
Your base hourly pay or salary is the obvious piece, but accrued wages cover more than that. Overtime you’ve earned but haven’t been paid for is accrued. So are commissions on sales you closed during the current pay period and non-discretionary bonuses tied to specific targets. The distinction with bonuses matters. If your employer promised a bonus for hitting a production goal or staying employed through a set date, that bonus accrues as you meet the conditions. A purely discretionary bonus, where your employer has no obligation and picks the amount after the fact, doesn’t accrue the same way.
Vacation and sick leave sit in a separate category. Federal law does not require employers to provide paid vacation or sick time, and it does not require payout of those benefits at termination.1U.S. Department of Labor. Vacation Leave Many states and many employer policies do treat accrued vacation as earned compensation that must be paid out. If your handbook says you earn a set number of vacation hours per pay period, those hours can represent real dollars that build up alongside your regular wages. Check your state’s rule and your employer’s written policy.
How to Calculate What You’re Owed
The math is simple once you know the accrual period, meaning the stretch of days between the end of your last paid pay period and the date you’re calculating through. That end date is often month-end, or your last day of work if you’re leaving.
For hourly workers, multiply your hourly rate by the number of unpaid hours. At $25 an hour and 40 unpaid hours, you have $1,000 in accrued wages. Add any overtime hours at 1.5 times your regular rate.
For salaried workers, divide your annual salary by the number of working days in the year (typically around 260) to get a daily rate, then multiply by the number of unpaid workdays. A $78,000 salary works out to $300 per day. Five unpaid workdays gives you $1,500.
When Your Employer Must Pay You
The Fair Labor Standards Act does not dictate how often your employer must pay you. That’s a state decision, and almost every state has a payday law on the books.2U.S. Department of Labor. State Payday Requirements Most states allow weekly, biweekly, or semimonthly schedules, with monthly pay permitted for certain workers. Whatever schedule your employer uses, federal rules require that overtime earned in a particular workweek be paid on the regular payday for that period.3eCFR. 29 CFR 778.106 – Time of Payment If the correct overtime amount can’t be calculated by then, the employer must pay it as soon as practicable, and no later than the next regular payday.
Final paychecks are governed by state law. Deadlines vary widely. Some states require immediate payment when an employee is fired; others give the employer until the next regular payday. For employees who resign, a few states set the deadline based on how much notice you gave. Federal law requires payment for all hours worked but doesn’t impose a specific final-paycheck deadline beyond the general obligation to pay wages when due.4Office of the Law Revision Counsel. 29 USC 216 – Penalties
Whether accrued vacation has to be included in that final check is entirely a state-law question. Roughly half of states require employers to pay out unused vacation when the employer’s own policy or a contract promises it. The other half leave it to the employer’s discretion.
What Can Legally Be Deducted
Federal law requires that wages be paid “free and clear,” meaning your employer can’t claw back parts of your paycheck in ways that shift business costs onto you.5eCFR. 29 CFR Part 531 – Wage Payments Under the Fair Labor Standards Act of 1938 Some deductions are permitted, but each has limits:
- Taxes. Employers can withhold income tax, Social Security, and Medicare. They cannot deduct their own share of payroll taxes from your check.
- Board and lodging. If your employer provides housing or meals, those costs can be deducted at reasonable cost with no profit margin built in.
- Tools and uniforms. These deductions are illegal to the extent they push your pay below minimum wage in any workweek.
- Court-ordered garnishments. Employers can withhold amounts required by a court order, as long as the garnishment doesn’t exceed federal limits under the Consumer Credit Protection Act.
- Voluntary deductions. Retirement contributions and health insurance premiums you’ve authorized are allowed, as long as the employer doesn’t profit from the arrangement.
These rules apply to every paycheck, including your last one. An employer that deducts the cost of a broken laptop from your final check and drops your pay below minimum wage has violated federal law, even if you did break the laptop.
When Accrued Wages Become Taxable
If you’re an employee, you don’t owe income tax on wages the moment you earn them. You owe it when you’re paid. The IRS applies a rule called constructive receipt: income is taxable when it’s credited to your account or made available to you without substantial restrictions.6eCFR. 26 CFR 1.451-2 – Constructive Receipt of Income Wages sitting in an accrual on your employer’s books, where you can’t access them because payday hasn’t come, aren’t constructively received. They become taxable the day the paycheck lands in your account or is available for pickup.
The same timing applies to withholding. Federal income tax, Social Security, and Medicare withholding are triggered based on the date wages are actually paid, not the date the work was performed.7Internal Revenue Service. Employment Tax Due Dates
If Your Employer Files Bankruptcy
If your employer files for bankruptcy, unpaid wages don’t simply vanish. Federal bankruptcy law gives wage claims a fourth-priority status, meaning they’re paid before most other unsecured debts like trade creditors and bondholders. Two limits apply. The wages must have been earned within 180 days before the bankruptcy filing or the date the business shut down, whichever came first. The priority claim is capped at $17,150 per person under the current adjusted threshold.8Office of the Law Revision Counsel. 11 USC 507 – Priorities
The cap covers wages, salaries, commissions, and earned vacation and sick leave. If your employer owes you $20,000 in back pay, the first $17,150 gets priority treatment. The remaining $2,850 falls into the general unsecured pool, where recovery rates are often pennies on the dollar. Priority status doesn’t guarantee full payment. It just moves you closer to the front of the line.
What to Do If You’re Not Paid
Employers who don’t pay accrued wages face real consequences under federal law. The FLSA makes an employer liable for the full amount of unpaid minimum wages or overtime, plus an equal amount in liquidated damages, effectively doubling what you’re owed.4Office of the Law Revision Counsel. 29 USC 216 – Penalties If a company stiffs you on $3,000 in overtime, you can recover $6,000 plus attorney’s fees and court costs. For repeated or willful violations, employers also face civil penalties of up to $2,515 per violation payable to the government.9U.S. Department of Labor. Civil Money Penalty Inflation Adjustments Many states add penalties on top, from daily accruing fines to multiplied damages.
You have two main paths. You can file a complaint with the Department of Labor’s Wage and Hour Division by calling 1-866-487-9243 or visiting your nearest WHD office.10U.S. Department of Labor. How to File a Complaint The WHD can investigate and pursue back wages on your behalf at no cost to you. Or you can file a private lawsuit in federal or state court, which is often the better route for larger amounts because it opens the door to liquidated damages and attorney’s fees.
Time matters. The statute of limitations for recovering unpaid wages under the FLSA is two years from the date the wages were due. If the violation was willful, meaning the employer knew it was breaking the law or showed reckless disregard, you get three years.11U.S. Department of Labor. Back Pay State deadlines may be shorter or longer. Every pay period that slips past the limitations window is money you can no longer recover.
Keep Your Own Records
Federal law requires employers to keep payroll records and collective bargaining agreements for at least three years, and supporting documents like time cards, work schedules, and wage rate tables for two years.12U.S. Department of Labor. Fact Sheet 21 – Recordkeeping Requirements Under the FLSA In a dispute, the employer bears the burden of producing accurate records, and one that can’t will struggle to argue it paid you correctly. Keep your own copies too. Pay stubs, time sheets, and any written communications about your compensation form a paper trail that makes any future claim faster and stronger.