Payroll deduction to repay overpaid wages

Michelle85
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Payroll deduction to repay overpaid wages

Hi there,

 

We have an employee who was overpaid $1,200 odd (prior financial year), they have spent the money & can only afford to repay $50/fortnight (over 24.5 pay periods).   

 

What is the best way to record this through payroll and deduct every fortnight - do we raise an invoice for the overpaid wages and deduct to undeposited funds and pay to the invoice each fortnight, or is there a better & easier way?  

 

Also, can we move the negative amount from the 'Cash' Bank account when the negative pay is recorded?  

 

Appreciate any help on this.

3 REPLIES 3
Tracey_H
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Re: Payroll deduction to repay overpaid wages

Hi @Michelle85 

 

Thanks for your post. As the overpayment relates to a previous year the first thing I'd recommend doing is speaking to the ATO as this will impact PAYG for the business and the employee's tax return. These links to the ATO website have detailed information: Overpayment in a previous year STP      Overpayment relates to a previous financial year PAYG

 

From an AccountRight perspective, when processing the employee's pay you would just need to reduce the amount of the payroll category that was overpaid by the agreed amount. Make sure you've got the agreement in writing to cover your Fairwork obligations.

 

This help article has instructions for handling overpayments in AccountRight: Fixing a payroll overpayment or underpayment

 

Please let me know if you need further help.

 

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

Cheers,
Tracey
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Michelle85
Experienced User
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Re: Payroll deduction to repay overpaid wages

Hi there,

 

Thanks for this however, it does not help me.  I have checked with the ATO and are aware that we will need to run a negative payrun as at the 30th June 2021 for the overpayment and run an 'Update Event' through STP.

 

After reading up on overpayments and running negative payroll, i can see that it will be paid as cash and a negative amount will appear in the Bank account linked to the system, as at the 30 June.

I am hoping that someone can advise where to from here.....

 

The amount will need to be journalled out of the Bank a/c as it will not be being paid in one lump sum on the 30th June, it will be being paid over 26 fortnights through a deduction in payroll processing.

 

I suppose I am looking for some clarification on moving it from the Bank account, and recording the deduction on a fortnightly basis?  One employee has left, so an invoice will need to be raised for this one, so would we be best to invoice each employee for the overpayment and the payroll dedcution payment each fiortnight can reduce the outstanding onvoice??

 

Hopefully I have made sense and I am not overthinking & over complicating this.  I apprecaiet any assistance or advice anyone can provide.

Tracey_H
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Re: Payroll deduction to repay overpaid wages

Hi @Michelle85 

 

Apologies for the delay in getting back to you. You could change the linked account for Payroll Cash payments to a different account like a Payroll Clearing Account or Payroll Repayment Account, whatever best suits you. When you record the negative pay the Payroll Clearing account will be debited.

 

When you create the deduction payroll category make the Linked Payable Account the same Payroll Clearing Account. Then when you record a normal pay the deduction amount will credit that account and reduce it's balance.

ded.PNG

 

Please let me know if you need further help.

 

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

Cheers,
Tracey
Previously @bungy15

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Online Help| Forum Search| my.MYOB| Download Page

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