Employee refund overpayment

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  • Updated 3 years ago
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An employee was overpaid and has since left the company.  He was paid 20 hours and only worked 10  before he quit. He has now returned $120 cash to me. How do I enter this refund.
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DebonAir

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Posted 3 years ago

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Rav, Community Manager

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Hi Debbie,

I've found a KB article here which may help -
http://kb.reckon.com.au/issue_view.asp?ID=4195

Let me know,

Cheers
Rav
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DebonAir

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Hi, thanks but this is not helping much. The guy left the company last year in October. He has now come back to pay the money back.  I cant find how to do reverse wages and receive the cash. I have done journals but they are not linking to his payroll records and not showing on the payment summary.
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Andrew

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Hi Debbie,

You might want to have a read over the over payments section here

https://www.fairwork.gov.au/pay/deduc...

If he has left and you have over paid him. I think for a tiny amount of $120, its a suck it up type of matter. You'll spend more in 'wages' to resolve the issue and refund the tax/super over payments that would have went hand in hand with that over payment.

He has in good faith been willing to repay it, so leave it at that. Treat it as a live and learn to double check your pay runs in the future.

If he was a current employee you could put through a deduction over the next few pays, but his not.
(Edited)
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Suzanne Lockwood, Accredited Partner

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Hi Debbie,

I had to assist a client this week with the same issue; this is how we tackled it:

1.      Record a Deposit into your bank account for the overpaid wages allocating the amount to a Payroll Clearing Account.  Setup a new Bank type account if this account does not already exist in your Chart of Accounts.

2.      Create a new Hourly Wage payroll item:

(a)      Name:  Gross Wages Overpaid Recovered.

(b)      Expense Account:  Select your usual wages account.

(c)      Tax tracking type:  Gross Payments [to reduce the Gross payments reported on the Payment Summary].

(d)      Taxes:  Tick PAYG Tax and State Payroll Tax [to reduce the Total Tax Withheld amount on the Payment Summary and Payroll Tax reporting (if applicable].

(e)      Inclusions:  Tick the relevant Super items if the reversal is within the unreported quarter [to reduce the amount of super expense and liability].

3.      Create a new Addition payroll item:

(a)      Name:  Net Wages Overpaid Recovered.

(b)      Expense Account:  Payroll Clearing Account [to offset the net wages amount allocated to this account by the Deposit in Step 1 above and clear out the account].

(c)      Tax tracking type:  None [as this is taken care of in Step 1(c) above].

(d)      Taxes:  Untick all [as this is taken care of in Step 1(d) above].

(e)      Calculate based on quantity:  Neither.

(f)       Default rate and limit:  Leave blank.

(g)     Inclusions:  Untick all [as this is taken care of in Step 1(e) above.

4.      Create another new Addition payroll item:

(a)      Name:  Wages Overpaid PAYG Reversal.

(b)      Expense Account:  Your usual PAYG Withholding Liability Account [to reduce the balance in this account].

(c)      Tax tracking type:  None.

(d)      Taxes:  Untick all.

(e)      Calculate based on quantity:  Neither.

(f)       Default rate and limit:  Leave blank.

(g)     Inclusions:  Untick all.

5.      Record the wage reversal using the Payroll Clearing Account:

(a)      Use the Gross Wages Overpaid Reversal item in the Earnings section with a negative hours quantity.

(b)      Use the Net Wages Overpaid Reversal item in the Other Payroll Items section for the net wage refunded.

(c)      Use the Wages Overpaid PAYG Reversal item in the Other Payroll Items section for the tax withheld amount.

(d)      Confirm the cheque amount is zero and complete the processing.

6.      Record the Liability Adjustment:

(a)      Date:  Date of refund.

(b)      Effective Date:  Date of refund.

(c)      Adjustment is for:  Employee – select from dropdown list.

(d)      Accounts Affected:  Do not affect accounts [this is only to correct the Payment Summary].

(e)      Select the PAYG Tax payroll item in the Taxes and Liabilities section using a negative amount with an appropriate memo [reduce the amount in the Total Tax Withheld on the Payment Summary].

7.      Verify:

(a)      The PAYG Withholding liability account has been reduced by the amount of the tax.

(b)      The Payroll Clearing account has a debit and credit entry for the amount of the net wage.

(c)      The Wages accounts shows a negative entry for the amount of the gross wage.

(d)      The Payment Summary agrees with the Payroll Summary report for the Employee.


Hopefully this is of some help.

Regards,
Suzanne
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DebonAir

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Tracey Dix

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Hi Suzanne,

This information has come in handy for the company I work for - however, I have a question regarding the last step in the Verify process.

I have checked the reports mentioned in steps 7(a), (b) & (c) & all is fine, my question is with step (d) - When you say Payment Summary do you mean the actual PAYG summary that prints from the Employees drop down menu & can this be printed at anytime of the year? I am a little hesitant to run this step in case I muck something else up & if I cannot run step (d) how can I verify the details in the Payroll Summary Report?

Your assistance with this is greatly appreciated.

Tracey
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Suzanne Lockwood, Accredited Partner

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Hi Tracey,
You are right, I do mean the PAYG Payment Summary and it is safe to run it at any point during the year without causing a problem.
Cheers, Suzanne
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Abbie Huxley

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Hi Suzanne,

I find myself in the same situation however the over payment in our payroll was for reimbursements, not wages.  A one-off reimbursement ended up as a weekly reimbursement in an employee's payroll file and hence he was "reimbursed" for several weeks before the error was picked up.  He has since left the company but is making weekly repayments to pay back the money.  As a reimbursement does not affect tax or super I am just looking for a simplified version of above.  Are you able to help?
Thanks, Abbie
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Suzanne Lockwood, Accredited Partner

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Hi Abbie,
Apologies for this very tardy response but only just recovering from a rather busy few months.  This is probably too late now but thought I would post anyway.
Without knowing how you manage reimbursements in your accounts and what your setup is in payroll and how it is linked to the accounts, it is a bit hard to say exactly.  However, if you are using an Addition, then a Deduction linked to the same account acting as a reversal might work for you?
Happy to help further if you still need to resolve this.
Regards, Suzanne