If you accidentally made an extra payment to an employee, stop worrying and take a deep breath because you're in the right place. This article will explain how to set up a deduction so you can easily recover your funds and what happens if the employee no longer works at the company.
Before setting up any deduction, we highly recommend reviewing this article which summarizes the Employee Standards Act (ESA) guidelines for each province regarding overpayment deductions. Check out the article here.
If you've ever set up a "Benefit," then setting up a "deduction" will be very familiar because the process is almost exactly the same. The only difference is selecting "Deductions" from the dropdown menu instead of "Benefits."
How to set up a deduction
Step 1: Create a Deduction
- In "Payroll," click on the "Benefits & Deductions" tab and select "Deductions" from the dropdown menu.
- Click the "+ Create Deduction" button on the top right corner to create a new deduction.
- Click the dropdown menu under the "Type" field and select "Salary Overpayment."
- After choosing the deduction type, you'll need to add a name for the deduction. The deduction name entered here will be will displayed on the employee’s pay stubs and in reports.
- You can also add a GL Code Payable if needed.
- Once you've completed the required fields, click "Save."
Step 2: Add Employee(s) to the Deduction
Now that you've created the deduction, you'll see it displayed on the Deductions table. The next step is adding the required employees to the deduction so you can recover the overpayment.
- Click on the deduction you just created.
- Click on the "Employees" tab.
- On the top right corner, click on the "Add/Remove Employees" button.
- In the "Assign Employees" pop-up, select the employee(s) you want to add to the deduction.
To find the employees you need, you can do so in a few ways:
- Use filters to find the employees you need. You can filter by department, position or employment status. For example, if you want to add benefits to "onboarding" employees, then you can filter by "onboarding" status.
- Search by the employee name using the search box.
- Click "Select Page" to quickly select all employees.
Once you've selected the required employees, click the "Select" button.
Step 3: Configure the Deduction settings: Effective Date, Employee Premium and Frequency
We recommend speaking with your employee to create an overpayment recovery plan since the employee may not have the funds readily available if it was already spent. Your overpayment recovery plan should include the effective date, amount and frequency that the overpayment will be paid back.
The settings below may differ depending on what you have discussed with your employee(s) regarding an overpayment recovery plan.
Effective Date: The "Effective Date" of the deduction will default to the date that you've added the employee to the deduction. If you want to schedule the deduction for a later date, click the calendar icon and choose a future date.
Note: Similar to benefits, Humi Payroll will not prorate deductions. This means if the "Effective Date" is in the middle of a pay period, the full premium amount will be deducted from the employee's pay cheque. The premium amount won't be prorated or adjusted for the actual days the employee worked.
Employee Premium: Premium amounts can be set up as a dollar value or a percentage based on their compensation. This amount will be deducted from the employee's pay cheque.
This section will allow you to set when you'd like the employee premiums to be deducted from your employee's pay cheque. The default is each pay period, but if you prefer a different frequency, use the dropdown menu to select any of the following options:
- The first pay period
- The second pay period
- Last pay period
- Each pay period
- Just once
If the employee is able to pay the overpayment as a one-time payment, ensure that you change the frequency to "Just Once."
What happens if the employee who was overpaid is no longer working at the company and does not have future payrolls?
If there is at least one business day before the employee is to receive their final pay, our team may assist in issuing a stop payment. We can only process a stop payment if we receive the request 48 hours before the scheduled pay date.
If you need a stop payment, send an email to firstname.lastname@example.org as soon as possible, including necessary details such as the employee's full name, amount, pay period etc.
Humi will cancel the payment, adjust the YTD and refund or hold funds as instructed in your email.
If the employee has already been paid, Humi would be unable to assist with the overpayment recovery. This would have to be done outside of Humi. However, Humi can assist with adjusting the YTD information to ensure that their year-end records would be correct.
Please note there is a service charge applied to issue a stop payment and/or to make adjustments to an employee’s Year-to-Date. Please see our applicable service charges here.