What Do I Do If I've Accidentally Overpaid An Employee?

Overpaying an EmployeePart-time sales rep Mike typically works 30 hours a week, but this past week his schedule was slightly different because of a family obligation that required him to take a few days off. He only worked 14 hours and you just accidentally paid him for 30. Uh-oh.

Now what? If you’re not “buddies” with Mike, confronting him about the situation can be awkward, to say the least! Will he recognize that he’s been overpaid and come to you? Should you wait to see what happens?

The answer is no; don’t wait. The first step in handling this situation is to confront your employee. You’ll likely want or need to recover the overpayment and there’s actually several state laws surrounding payment errors, which means you’ve got to go about this the right way.

Always make sure that your payroll records are intact. You can’t make a claim unless you have the documentation and evidence to back it up. If you don’t have significant documentation, the state may not actually allow you to “take back” money from your employee, and you could end up in a sticky lawsuit.

Now, how do we actually recover the funds? Laws vary from state to state. In some states you can deduct money from your employee’s future paycheck(s) until the balance is recovered, but not if that deduction results in your employee’s paycheck being less than minimum wage in the upcoming weeks. In other states, you can demand full repayment via personal check from your employee if the overpayment was within a certain percentage of the person’s regular payroll.

Small overpayments are a little bit easier to manage. If you need to recover a large sum, it may very well need to happen over a series of paychecks for the next month or so. What a headache!

A PEO Can Help

Employment law is complex, especially everything that falls within the Wage and Hour Division (WHD).  As an employer, you have to abide by federal and state laws – which can be difficult to do at times when you’ve run into a situation as such.  Some of us tend to panic, and forget the protocol – if we even knew it in the first place!

Alongside payroll processing services, PEOs offer a lot of support. They know state laws and federal laws inside and out and can even handle this “awkward” situation on your behalf, as your payroll processor/service provider.  PEOs reduce the number of hats you need to wear as a business owner, which by the way is a GOOD thing! Fewer miscalculations and clerical errors results in less stress, and allows you to focus on your company’s core competencies while the PEO focuses on theirs.

To learn more about PEOs and avoiding or managing payroll errors like this, contact PEO Advantage today.

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