3501 PR.04 Overpayments and Underpayments

    Revision Date: 
    October 31, 2019

    Contents

    1.     Overpayment Correction

    2.     Underpayment Correction

    A.  Causes

    Payroll overpayments typically are related to one of the following circumstances:

    • Employee receives pay for period after termination or start of unpaid leave.
    • Time entry error:
      • employee is paid for too many hours.
      • employee is paid for paid time off that was not available.
    • Hourly rate or salary error in HR database leads to overpayment of hourly rate or monthly amount.
    • Other:
      • Employee received jury duty pay in addition to regular wages or salary.

    Overpayment of benefits reimbursements is not included here.  To correct benefits reimbursements, contact the Employee Service Center at employee.services@yale.edu or 203-432-5552.

    B.  Responsibility for Repayment and Correction

    Lead Administrators or operations managers (or assigned delegates), through the Payroll Preview Review or other means, and employees are responsible for identifying overpayments.

    If an overpayment is discovered, the business office must immediately inform Payroll by submitting either Form 3501 FR.05 Direct Deposit Pull Authorization (if the error is discovered after the direct deposit has been distributed (file sent to the bank)) or Form 3501 FR.06 Overpayment Recovery Form (if the error is discovered after the paycheck has been distributed) to employee.services@yale.edu.

    Payroll is responsible for calculating the amount of the overpayment, notifying the supervisor that corrective action will be taken to reimburse the University for the funds, and following up on the overpayment until it is recovered or written off.  

    Payroll will ensure that overpayments are properly accounted for in the University’s financial system as follows:

    • When Payroll recovers the overpayment from a current employee by deducting the overpaid amount from the employee’s next paycheck, Payroll will inform the home department.
    • If a former employee fails to repay an overpayment within 90 days, Payroll will inform the home department that no actions will be taken; the home department will have to absorb the cost. 

    If the overpayment has been charged to a grant fund, the department is responsible for reclassifying it.

    C.  Correction Methods

    The department’s business office must choose the appropriate method and see specific procedures below:

    If overpayment error is discovered…

    then…

    after the direct deposit has been distributed (file sent to the bank),

    the business office must:

    1. promptly complete Form 3501 FR.05 Direct Deposit Pull Authorization.  (Direct deposit can only be pulled after the pay date, up to five days.  See Payroll Schedule.)
    2. immediately email the completed form to the Employee Service Center at employee.services@yale.edu or fax it to 203-432-5153.

    after the paycheck has been distributed,

    if the entire paycheck was issued in error (e.g., after termination, unpaid leave), and the business office has the paycheck, the business office must:

    1. complete Form 3501 FR.06 Overpayment Recovery Form.
    2. immediately email the completed form to the Employee Service Center at employee.services@yale.edu or fax it to 203-432-5153.
    3. deliver the paycheck to either Employee Service Center at 221 Whitney Avenue, 1st Floor, or Payroll Services at 25 Science Park, 2nd Floor, or send via U.S. mail to P.O. Box 208356, New Haven, CT 06520.

    if the business office does not have the paycheck, or only part of the paycheck is an overpayment, the business office must:

    1. complete Form 3501 FR.06 Overpayment Recovery Form.
    2. immediately email the completed form to the Employee Service Center at employee.services@yale.edu or fax it to 203-432-5153.
    3. for current employees, Payroll will send an email to the department approver informing them of the overpayment and that the employee’s next regular paycheck will be reduced by the amount of the overpayment.
    • the adjusted earnings element will be the original element charged.

    if the charging instructions for the overpayment reimbursement are different from the charging instructions for the other portions of salary at the time of deduction, the department should set up an element-level schedule in Payroll Costing for the Salary Recovery element.  If the charging instructions for the overpayment reimbursement are the same as the other portions of salary, no further work is needed in Payroll Costing.

    1. for ex-employees, Payroll will send a letter to the ex-employee and the department approver informing them of the overpayment and informing the employee that s/he must immediately repay the University.  If necessary, Payroll will send a follow-up letter in 30 days.

    For students paid via Graduate Student Funding (“GSF”), contact the Graduate School Financial Aid Office (203-432-7598) to arrange for correction.

    For non-GSF professional school students, the professional school business office should arrange for correction.

    D.  Where Credits Appear for Overpayment Corrections

    The account that will be credited for an overpayment correction depends upon the employee’s payroll:

    • For monthly payroll, the salary reduction amount in employee’s next regular paycheck will appear in the department’s account at the time of completion.
    • For hourly (weekly or semi-monthly) payroll, the salary reduction amount is credited to the charging instructions originally charged, unless the department provides other instructions.

    E.  Taxes

    Individuals are taxed on the date of payment or date on which pay was reduced, not the date the pay was earned.  At the end of the tax year it is particularly important that corrections be made promptly to ensure that the employee’s W-2 statement is accurate.

    F.  Payroll Deductions for Personal PCard Transactions

    Payroll deductions for PCard transactions flagged as personal are ordinarily deducted from the employee’s pay one month in arrears (e.g., personal PCard transactions flagged in June are deducted from pay in July).

    If an employee has an impending separation from Yale, there may be a need to deduct personal PCard transactions from the employee’s pay outside the ordinary schedule.  The department is responsible for reviewing that employee’s current month expense reports and calculating any personal transactions.  When there are personal transactions, the department should complete and submit Form 3501 FR.14 Payroll Deduction Request for Personal PCard Transactions of Separating Employee.  Departments should access the Payroll Schedule to determine the final payroll processing end date and submit the completed form to askfinance@yale.edu at least five (5) business days prior to that date.

    For a current employee who has personal PCard transactions misidentified as business expenses, departments may submit Form 3501 FR.06 Overpayment Recovery Form, as described above, for a payroll deduction in a subsequent month.

    A.  Causes

    Payroll underpayments typically are related to one of the following circumstances:

    • Employee does not receive approved additional compensation in a timely fashion.
    • Employee does not receive pay for period after return from leave.
    • Time entry error: employee is paid for too few hours.
    • Hourly rate or salary error in HR database leads to underpayment of hourly rate or monthly amount.
    • Other circumstances requiring research by Payroll and/or Human Resources representative.

    Underpayment of benefits reimbursements is not included here.  To correct benefits reimbursements, contact the Employee Service Center at employee.services@yale.edu or 203-432-5552.

    B.  Responsibility for Correction

    Lead Administrators or operations managers (or assigned delegates), through the Payroll Preview Review or other means, and employees are responsible for identifying underpayments.

    If an underpayment is discovered, the business office must immediately inform Payroll by submitting Form 3501 FR.07 Payroll Payment Adjustment Form to employee.services@yale.edu.

    The department is responsible for calculating the amount of the underpayment.  Payroll is responsible for ensuring that that amount is paid to the employee. 

    Underpayments should be corrected as soon as the error is identified.

    C.  Correction Methods

    All correction requests are subject to receiving the appropriate approvals before the corrections are processed.  The department’s business office must use the appropriate correction method for the employee category:

    Employee Category

    Required Action

    Non-hourly: Current Faculty and Exempt M&P Employees

    The business office must:

    1. complete Form 3501 FR.07 Payroll Payment Adjustment Form.
    2. email the completed form to the Employee Service Center at employee.services@yale.edu or fax it to 203-432-5153.
    3. the amount due will be added to the next regularly scheduled paycheck or, if the underpayment was due to a payroll processing error that resulted in an underpayment of a monthly employee’s base salary, the amount will be paid by check or in the next paycheck, whichever method the employee chooses.

    Hourly: Clerical & Technical and Service & Maintenance

    The business office must:

    1. complete Form 3501 FR.07 Payroll Payment Adjustment Form.
    2. check the box to indicate how the employee would like to receive the underpayment: in their next paycheck, or pick up the check, or have it mailed to them.
    3. email the completed form to the Employee Service Center at employee.services@yale.edu or fax it to 203-432-5153.

    Former Employees

    The business office must:

    1. complete Form 3501 FR.07 Payroll Payment Adjustment Form.
    2. check the box to indicate whether the former employee would like to pick up the check or have it mailed to them.
    3. email the completed form to the Employee Service Center at employee.services@yale.edu or fax it to 203-432-5153.

    Students paid via Graduate Student Funding (“GSF”)

    Contact the Graduate School Financial Aid Office (203-432-7598) to arrange for correction.

    Non-GSF professional school students

    The professional school business office should arrange for correction.

    Hourly: Casual/Student

    The business office must:

    1. complete Form 3501 FR.07 Payroll Payment Adjustment Form.
    2. check the box to indicate how the employee would like to receive the underpayment: in their next paycheck, or pick up the check, or have it mailed to them.
    3. email the completed form to the Employee Service Center at employee.services@yale.edu or fax it to 203-432-5153.

    D.  Payment Processing

    Payments are processed in the same manner as the employee’s regular pay method.  Normally, payments will be available within 3 business days after Payroll receives the payment adjustment form.

    E.  Where Charges Appear for Underpayment Corrections

    The account that will be charged for an underpayment correction depends upon the employee’s payroll. 

    • For monthly payroll, the underpayment amount is charged to the charging instructions as of the pay period in which the correction is processed.
    • For hourly (weekly or semi-monthly) payroll, the underpayment amount is charged to the charging instructions provided on Form 3501 FR.07 Payroll Payment Adjustment Form.

    F.  Taxes

    Individuals are taxed on the date of payment or date on which pay was reduced, not the date the pay was earned.

    If the underpayment is significant, the employee may wish to modify the tax withholding for the correction paycheck only.  To do so, the employee should submit two W-4 forms, one to reduce withholding for the specific correction paycheck, and one to resume normal withholding afterwards.

    W-4 forms may be obtained from the University Policies & Procedures pages.