If an employee has been overpaid, the overpayment is considered a legal debt and must be repaid in full. Payroll will initiate recovery efforts as soon as the discrepancy is identified. When an overpayment is discovered, either by the department or the employee, it is essential to notify Payroll in writing (email is acceptable). The notification should include the date the issue was discovered, the overpayment period, and the amount and type of overpayment (e.g., regular wages, bonus, overload, overtime) if known.
The Payroll Department strives to work cooperatively with the affected employee while adhering to state regulations to ensure an orderly repayment process. We aim to resolve the issue without causing undue financial hardship to the employee.
Once the amount to be repaid is calculated, the employee will receive an email and a letter detailing the repayment amount. The employee may repay the debt via personal check or through a payroll deduction (if actively employed), in accordance with state regulations.
If repayment is made in the same calendar year as the overpayment, the employee will repay the net amount of the overpayment. The Payroll Department will adjust the employee's taxable wages and corresponding taxes for that year to ensure the year-end W-2 Form is accurate.
If the repayment is made through payroll deduction, the repayment may be spread across multiple pay periods. However, the repayment should not extend beyond the duration of the overpayment period. For example:
· If the employee was overpaid for one pay period, the repayment should be made in one pay period.
· If the employee was overpaid for four pay periods, the repayment should be made over four pay periods to recover the full amount.
If repayment is not made in the same calendar year in which the overpayment occurred, the employee must repay the gross amount of the overpayment, including the associated federal and state taxes. Taxes are credited to the employee on December 31 and cannot be recovered by the university.
Payroll can only recover the overpaid Social Security and Medicare taxes (FICA). The wages paid in error during the previous year remain taxable to the employee for that year, as the employee received and utilized those funds during that calendar year. The employee is not permitted to file an amended tax return for the prior year. However, the employee may be eligible for a deduction (or credit, depending on the amount repaid) for the wages repaid on their personal income tax return in the year the repayment occurs.
Once the repayment is completed, Payroll will issue a corrected W-2 Form (Form W-2c), adjusting only the applicable Social Security and Medicare wages and taxes.
Overpayments to terminated employees must be collected through the university's established collections procedures for Accounts Receivable.
If an employee takes and reports leave in excess of their available leave balances, they will not receive pay for the excess amount. Payroll will process a dock pay transaction in the period in which it occurs or potentially in subsequent periods where necessary.
Retroactive pay refers to delayed payment for work that has already been performed. This often occurs due to delayed paperwork submitted by departments. Employees should not begin work until all hiring requirements have been fulfilled. To ensure timely payment, retroactive pay situations should be avoided whenever possible.