Payroll adjustments due to overpayment

[Amberdiva]

Hi, I'm wondering if someone can help me figure out this puzzle please? 

3 staff were overpaid. The 3 pays were reversed however the funds had already been transferred through the bank. 3 new pays were created to reflect what their pays should have been. The next step should have been manually withholding the amount they were overpaid from their following pay.

Instead, another adjustment was made in the system on their following pay which has created a kind of double negative in the system.

Eg. $3000 (original pay) - $3000 (reversal) - $297.50 (further adjustment made on following pay) = -$297.50

This is causing the electronic clearing account to be out of balance. How would you correct this and what would have been the correct way to adjust it please? 

[Tracey_H · Accepted solution]

Hi @Amberdiva 

Thanks for your post. Typically if an employee has been overpaid and the wage has been transferred through the bank you wouldn't adjust the pay transaction. This is so the amount transferred matches the pay transaction. To fix the error you would process an adjustment pay if the employee was repaying the overpaid amount or include the adjustment in the following pay if you are withholding the overpaid amount. Again this is so the amount transferred matches the pay transaction.

How you fix your current issue will depend on whether you use bank feeds and how you want to handle the reconciliation of those transactions. Your options are:

1. Reverse the second pay and reprocess without the adjustment. You won't be able to match bank feeds because the amounts are different so you'll need to manually reconcile both weeks pay transactions.
2. Reprocess the first weeks original pay transaction so that the net amount matches the amount transferred and reverse the new pay. Leave the second week's pay with the adjustment. You'll be able to match bank feeds because the amounts are the same.

Fixing a payroll overpayment or underpayment 

Please let me know if you need further help with this.

If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

[Amberdiva]

Thanks Tracey. The missing piece of the puzzle was that our payroll admin had created a clearing transaction dated months after the original ones, which had also created another discrepancy on the bank. Fixed now but thank you for the advice on how to resolve in future.