The Payroll Blog
News, tips, and advice for small business owners
Payroll Mistakes that Benefit Employees
For employees, it’s almost as good as hitting the lottery–they open their paychecks or log on to their bank accounts and find extra money courtesy of the company.
For employers, of course, it's not nearly such a happy occasion. If you make a payroll mistake that benefits an employee, you will (probably) get that money back if you figure out your error. But if your employee decides to be difficult, it could take a while and require a lot of effort and time on your part.
Payroll mistakes that benefit employees
Some examples situations that can lead to payroll mistakes benefiting employees:
- Hourly workers whose schedules fluctuate from one week to the next.
- Getting caught in a time crunch and rushing through payroll, leading to accidental overpayment.
- Software glitches that can cause overly generous paychecks, particularly when you upgrade current payroll system or switch to a new one.
- Changing pay schedules.
You'd like to think that your employees would be forthcoming and let you know when you've made an error. Don't count on it. The best way to fix the problem is to head it off entirely. Periodically audit and cross-check your payroll records, to make sure you aren't overpaying.
If it's too late and you have accidentally overpaid employees, what can you do?
Act fast when you discover errors. Telling employees they have to give the money back will not necessarily be a pleasant conversation, but it will only get harder the longer the extra money is in the employee's name.
Let the employee know what happened. It might be tempting to just dock the employee the extra amount from her next paycheck, but try to resist that urge. It's illegal in some states to deduct money without the employee's explicit agreement, and other states require notification and limit the amount of money you can deduct. Employees also won't appreciate that method, particularly if they didn't notice the overpayment—which may be unlikely but is possible. If you made a mistake, fess up.
Be reasonable, at least at first. You don't want to create hard feelings over the situation. When talking to the employee, be sympathetic and apologize for the hassle. Try to work with them on the most convenient repayment method, whether that's having them write you a check, setting up a repayment schedule or deducting the amount from future earnings. You can always take a hard line later if the employee balks at giving you back your money.
If you are using a payroll service, be sure to contact the service and ask for help if you are changing your payroll schedule or settings, so they can assist in you in avoiding costly errors.
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