3501 PR.26 Overpayments and Underpayments

Revision Date: 
December 9, 2014

1 – Overpayment Correction……………………………………………. 1

2 – Underpayment Correction………………………………………….. 4

1 – Overpayment Correction

Causes

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

  • Employee receives pay for period after termination or start of unpaid leave.
  • Rolling advance is not recovered when C&T employee terminates.
  • 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.
    • Occasionally when an employee paycheck is pulled and rolled back due to termination or other circumstances, a payment to a third party (e.g., TIAA-CREF, credit union) has already been processed.

Overpayment of benefits reimbursements is not included here. To correct benefits reimbursements, contact the Employee Service Center at 203-432-5552.

Responsibility for Repayment and Correction

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

  • Payroll is responsible for calculating the amount of the overpayment; notifying  the supervisor and employee 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 employee and the home department.
    • If Payroll recovers the funds from a former employee, Payroll will inform the home department that Payroll will credit labor suspense and the department will be responsible reclassifying the credit.
    • 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.

 

Correction Methods

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

If overpayment error is discovered…

Then…

before the paycheck or direct deposit has been distributed

The business office must:

  1.  Promptly complete Form 3501 FR.38 Payroll Check/Direct Deposit Pull Authorization. (Direct deposit can only be pulled two or more days before the check date. See Payroll Schedule.) 
  2. Immediately email the form to the Employee Service Center, 221 Whitney Avenue. (Or fax it to 203-432-5153).    

after the paycheck or direct deposit 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 a Form 3501 FR.40a Overpayment Recovery Form.
  • Mark correction method Returning paycheck.
  1. Attach the paycheck to the form and hand deliver to Employee Service Center, 221 Whitney Avenue, 1st Floor

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

  1. Complete Form 3501 FR.40a  Overpayment Recovery Form.
  2. Promptly e-mail or fax form to the Employee Service Center
  3. For current employees, Payroll will send an email to the employee and 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.

a. The adjusted earnings element name “Salary Recovery” and gross amount deducted will appear on the pay stub.

b.   The overpayment will be deducted using the Salary Recovery element.

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

  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 GSPS, contact the Graduate School Financial Aid Office (432-7598) to arrange for correction.

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

 Where Credits Appear for Overpayment Corrections

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

Correction Method

Monthly Payroll

Hourly Pay for Weekly or Semi-Monthly Payroll

Paycheck is pulled before the transaction is posted to the general ledger

The payment will not appear in the monthly financial statement.

The payment will not appear in the monthly financial statement.

Paycheck pulled after the payment is posted to the general ledger or returned

Payroll reverses the paycheck by crediting the PTAEO that was originally charged Because of the payroll processing calendar, the reversal may appear in the subsequent month’s statement.

Payroll reverses the paycheck by crediting the PTAEO that was originally charged. Because of the payroll processing calendar, the reversal may appear in the subsequent month’s statement.

Deduct from future paycheck

Salary reduction amount in employee’s next regular paycheck will appear in the account to which the Salary Recovery element is scheduled if such a Labor Distribution schedule exists, or in the account to which the assignment is scheduled, as of the pay period in which correction is processed.

Salary reduction amount is credited to PTAEO recorded in time entry systems.

 

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.

2 – Underpayment Correction

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 203-432-5552.

Responsibility for Correction

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

If an underpayment is discovered, the business office must immediately inform Payroll by submitting Form 3501 FR.40b Payroll Payment Adjustment Form to employee.services @yale.edu.

  • Payroll is responsible for calculating the amount of the underpayment and ensuring that that amount is paid to the employee. 
  • Underpayments should be corrected as soon as the error is identified.

 

Correction Methods

The department’s business office must use the appropriate correction method for the employee category:

Employee Category

 

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

The business office must:

  1. Complete a Payroll Payment Adjustment Form and send form to the Employee Service Center. 
  2. 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 a 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. Send form to the Employee Service Center. 

Former Employees

The business office must:

  1. Complete a 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. Send form to the Employee Service Center. 

Students paid via GSPS

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

Non-GSPS professional school students

The professional school business office should arrange for correction.

Hourly: Casual/Student

The business office must:

  1. Complete a 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. Send form to the Employee Service Center. 

Check Processing

If a check has been requested, Payroll will notify you when the check is available for pickup. Normally, checks will be available 3 business days after the payment adjustment form is received by Payroll.

Where Charges Appear for Underpayment Corrections

The account that will be charged for an underpayment correction depends upon the type of correction and the employee’s payroll:

Correction Method

Monthly Payroll

Hourly Pay for Weekly or Semi-Monthly Payroll

Add to next paycheck

Underpayment amount is charged to labor schedule as of pay period in which correction is processed.

Underpayment amount is charged to account entered in Time Entry or Kronos.

Check Issued (Quick Pay)

Underpayment amount is charged to account provided on Payroll Payment Adjustment Form.

 

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 Quick Forms(Link 1)  web site.