Ugent need help in payroll error !!!!

yanling

Hi every one, I need a help with how to deal with the payroll error? any help will be very appreciated!!!

The situation is : The employer was paid to the employee salary in error between 29th Febrary 2008 and 30th April 2008. Now it needs to collcet the overpayments to the employee, the employer required the employee to refund the gross amount overpaid, SHOULD THE EMPLOYEE REFUND THE GROSS PAY OR NET PAY? as from the employee's point he did not actually recevied all the GROSS PAY money how can I pay back MORE THAN I GOT?

Any advice will be very appreciated, thank you in advance.

Yanling

Nilesh Mandvia

Overpayment

Is this emplyee still employed?

You have a problem here, as you would have submitted your last year's payroll year end return, P35 and P11 and some of the overpayment was made in last year. If were to amend those return, then, you are looking at
penulty etc.

I think your best bet is to speak to your tax office, and ask them how you deal with this.

This what I would do, if overpayment is in the same tax year and employee is still employed, take off the overpayment from gross pay. It will take care of NI & Tax. (As long as after taking off overpayment, employee's gross pay is at least above ET level).

Nilesh

DaveP

If an employee has been overpaid then you need to request repayment of the net amount from the employee.

If the P35 is incorrect then you will need to submit a revised one to get the overpaid PAYE back. Assuming the original P35 was submitted on time then this will not necessarily result in a penalty.

Your bigger problem will be getting the money back from the employee if they no longer work for you. Let's hope the employee is co-operative otherwise you have a long fight on your hands.

yanling

Thank you very much Nilesh, actually the employee is my friend and still employed by his employer, as his employer kept making miskes of his salary, very annoying, that's why asked me for advice, but i never met this sort of problems before, not quite sure how to advice him what to do, thanks a lot.

Yanling

yanling

Thank you very much for your help DaveP, that was the advice I was looking for, really appreciated that.

Yanling

Nilesh Mandvia

Overpayment

As I suggested the employer takes off the payment from Gross Pay, your friend is not paying Paye or nic as he would be paying Paye and nic on lower amount.

For Example monthly salary is £2000.00 and overpayment is £500.00, So £2000 less £500, so gross pay would be £1,500.00, so the friend would pay paye and nic on £1,500, the effect is the friend is paying back net pay.

Your friend can pay back net pay by way of cheque or deducting from the net pay. But then, your friend’s gross taxable income would not be correct, unless you put through the payroll and deduct the gross overpayment amount from the gross amount.

If you don't then artificial inflated gross taxable income would have some impact on an individual depending on one's circumstances. Some would be in their favour for example would receive higher SMP, on the same time it can go other way for example would affect, working family tax credit, children’s tax credit.

Nilesh

payrollpro

Hi everyone,

I think everyone has grasped the fact that the employee pays back the sum they received. It has to be the net payment and we need to realise that a tribunal has already established that recovering the gross is unlawful. That was an old British Rail case.

There is no problem with the 07/08 return because that reflects what actually occurred in that year so it is not wrong, technically.

The employer needs to recover the money and then, and only then, adjust the payroll records in this year, not the old year. The return for 08/09 will reflect the payments made in the tax year offset by the recovery of overpayment in the period February to April.

One point though, does the employment contract give the employer the right to recover, also how is it being done, by payroll deduction (you mention the employee still works there) or is the employer issuing an invoice?

Payrollpro

Debz

Advice on payroll error

My advice is to
1)calcualte what should have been paid
2) calculate what has actually been paid
3) calculate the difference ( 1-2 above)

If your correcting through the payroll software you can make a Post tax deduction which deducts the overpayment Net of tax.

P35 should be ok for last tax year as no amounts are going through prior to 05/04/08 unless you revised the whole thing to put it right from the start and then you would need to revise the p35 also.

Hope this helps.