How to Stop Payment on a Payroll Check

Contact your bank to place a stop payment on a paycheck.

As an employer, you are required to pay your employees properly for work they perform. But under certain circumstances that payment may not be warranted. System glitches can result in the employee being overpaid and you may need to recover the funds. Furthermore, if the employee lost his paycheck or if it was stolen, you can stop payment and issue him another. There are specific requirements to placing a stop payment on a paycheck.

Instructions

1. Have the employee request the stop payment in writing if she lost the paycheck. Typically, banks charge the employer a fee for making the stop payment. If the employee caused the stop payment, then she incurs the cost. If not, the employer absorbs the fee.

2. Follow your bank's procedure on placing the stop payment. Many banks allow you to phone in the request, provided you are authorized to make it. Do not issue the employee another check until the stop payment is completely processed. Most banks have a 24-hour processing time frame. If you issue the replacement check beforehand and the employee locates the "lost" paycheck before the stop payment goes through, she can cash both checks.

3. Issue a reversal if the payroll was direct deposit. Follow your bank's protocol for this procedure. Typically, when you issue a reversal, your bank has to request the funds from the employee's bank. Once received, it credits it back to your account. Depending on the banks involved, reversals can take a few days (sometimes longer) to complete. If you issue the employee a replacement check and the reversal is unsuccessful, you run the risk of paying the employee twice. Therefore, do not issue a replacement check until your bank verifies that the reversal was a success.

Tips & Warnings

• Always void the check you placed the stop payment on. Voiding the check takes it out of the employee's year-to-date earnings. If you issue a replacement check, that payroll check data replaces the voided check.

References

• University of Massachusetts: Stop Payment Request - Payroll
• Emory University: Payroll Policy and Procedures