Types of overpayments
Please note that the examples provided are not related to any client's data or client's employees; these are made-up scenarios.
Overpayments that can be auto-generated corrections
Examples:
The employee's timesheet hours are corrected after it has already been processed in a payrun. The original hours paid were 12, however employee only worked 8 hours.
The employee had an incorrect pay policy assigned, causing the employee to be overpaid.
An incorrect amount was added for an employee allowance in the Additions / Deductions tab of the employee record.
Overpayments that require a manual line-item correction
Examples:
One-off payments that are not timesheet or award driven, i.e., bonus or commission payments.
Payments that were paid or processed prior to the commencement of Definitiv.
Pay Items required to process overpayments
Payment Tab
Overpayment Loan
This pay item is used to show the Net overpayment value.
Deduction Tab
Overpayment Repayment
This pay item is used for employees paying back an overpayment, both in a lump sum or in installments.
Question?
Q. Will the overpayment be recouped from the employee?
A. This is a decision required to be made by the management of the company:
No – no action is required - No changes or processing are required to be actioned. Employees' payment & records are to be left the same as at the time the original payment was processed.
Yes – the process in the next available payrun or an adhoc payrun.
Overpayments that occur in the current financial year
Options for recouping an overpayment from a current employee:
Lump sum payment of Net paid directly to the company once the year to date has been adjusted:
No further action is required within Definitiv
The Finance Team is responsible for allocating the payment accurately within the GL’s
Lump sum deduction processed via a payrun:
If the year to dates have already been adjusted in a payrun then there is no need to process again.
Process both an Overpayment Loan & Overpayment Repayment for the full amount owed adjusting the year to dates.
Installment deductions processed via a payrun:
Process an Overpayment Loan for the full amount owed, adjusting the employee's year to dates.
Process an Overpayment Repayment for the agreed amount to be repaid per pay period.
If required negate overpaid super from the next payment for the employee.
Options for recouping an overpayment from a terminated employee
Lump sum payment of Net paid directly to the company:
No further action is required as the Finance Team is responsible for allocating the payments accurately within the GL’s
Company to contact employees' super fund & request repayment of any super that has been overpaid.
Overpayments that occur in a previous financial year
Options for recouping an overpayment from a current /Terminated employee:
Payrun & payment dates need to be in the relevant financial year that the overpayment occurred & will need to be completed prior to the first payrun for the current financial year.
Remove PAYG from the adjustment payrun.
Employee is to pay back the Gross amount of the original payment from the Net amount of their current pay in either one lump sum or instalments.
A re-lodgement of the financial year that the overpayment occurred with need to be completed.
Example of how to present an overpayment to a client:
The employee was overpaid Overtime (OT)
Employees timesheets were updated to correct the hours
In the next payrun the employee had a backpay reversing the OT hours paid
The below spreadsheet example shows;
Was paid – the calculations as per the original payrun
Should have been paid – the calculations as per the backpay in the second payrun
Difference – the difference between the two calculations
Example of an overpayment
The employee had submitted timesheets with a task applied for Extended Shift, which was approved & paid.
As per the award, an Extended Shift pays as an Afternoon Penalty of 15% of the employee's hourly rate.
Maybelle had added the Extended Shift Task incorrectly & the manager did not review the timesheet prior to approving therefore this resulted in an unapproved payment for the Afternoon Penalty of 15% for the three days. Maybelle was supposed to add the Time in Lieu Task for the extra hours.
How can this be corrected?
Withdraw and resubmit timesheets, or in this instance, as it was supposed to be Time in Lieu change the task to from Extended Shift to Time in Lieu.
Create new payrun:
a. Adhoc using original pay period dates
b. Next fortnightly pay period
The overpayment process is when the employee has paid it back
Please note that you will need to receive the returned funds from the employee outside of Definitiv.
Once this has been discussed and agreed with your employee, you will need to do a correction payrun.
Create a payrun for the same pay period as the payrun in which the employee was overpaid.
Once created, you will then negate the line items that were overpaid.
You will then need to add the pay items that are in the overpayments loan pay item, and you will make the net amount a positive amount.
This will zero off the negative net amount and allow you to process the payrun.
You will then need to run the STP (Single Touch Payroll) YTD (Year To Date) report and check the employee’s YTD, is correct before publishing the manual payrun.