Pay needs to be adjusted due to incorrect entry (after payments have been made)

Georgie_8281276
Georgie_8281276 Member Posts: 18
I have incorrectly entered someone's pay for a three week period when I wasn't aware they were on holidays (and therefore paid them the wrong amount, both in Reckon and physically). Can I make a separate transaction in Reckon as an adjustment, or should I change their payslips and then deduct the difference from future payments?

Comments

  • DebonAir
    DebonAir Member Posts: 392
    edited May 2017
    If it was me doing this, I would go into each pay and correct them as they should have been and then make a single payment for the difference.  However, if you have overpaid someone, you cannot deduct a payment made to an employee unless it is to their benefit. 
    https://www.fairwork.gov.au/pay/deducting-pay-and-overpayments

  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited July 2020
    This is very interesting DebonAir and something that I was not aware of.  However, the example provided by FairWork of how to cater for an overpayment of wages, could potentially work against the employee if not handled correctly.  The employee has paid paid tax on the overpayment, but no mention is then made that the subsequent deductions should then also be subject to a tax deduction.  Be that as it may, my solution would be to come to the required agreement with the employee to have the overpayment reversed within payroll, as quickly as possible, and preferably in the next pay.  It could be that the amount is too great for this to happen on one pay, and if this is the case, I would still be looking to progressively reverse the original error, thereby preserving the tax aspect.
    John L G
  • DebonAir
    DebonAir Member Posts: 392
    edited May 2017
    The answer to this really depends on the agreement made by the employee and employer to repay the over payment or not. 
    My answer above to fix the original pays by unlocking the pay and re-entering correctly will have to be carefully and meticulously calculated with adjustments to be made in the next pay. Or, leave it as it is, then calculate what each pay should have been, gross and payg tax, and then calculate the adjustments to be made and add them or rather deduct them with the next pay run.

    However, the part about Fair Work Australia and overpayment to employees states that an employer cannot deduct overpayments made to employees unless it is to the benefit of the employee, and taking back an overpayment made in error is not to the benefit of the employee.

  • John Graetz
    John Graetz Member Posts: 1,651 ✭✭✭
    edited July 2020
    Whilst it does say that in one part, it also goes on to say that where an agreement cannot be arrived at, the employer should seek legal advice,  Again, the solution as provided by FairWork leaves a lot to be desired as it suggests that repayment could be made by cash, cheque or electronic transfer.  If that was strictly followed, the employee would end up paying in after tax dollars and that certainly would not be to their benefit.
    John L G
  • DebonAir
    DebonAir Member Posts: 392
    edited May 2017
    Yes correct, so it is good practice to first ensure there is an agreement in place. 
    Next, I would calculate the wages as they should have been paid, both Gross and Tax, compare them to the actual paid, both Gross and Tax, and then calculate the difference in both.
    The next pay run would include regular correct wages for the current week, then I would add in another line for Gross adjustment and then manually amend the tax if this does not automatically come out at the correct rate. 

    When I do this, I always show full weekly calculations on a spreadsheet, and give a copy of this to the employee with the payslip, and explain the whole lot to the employee so they are sure the deduction was calculated correctly. And the same if an employee is owed an increase going back for some weeks.