Employee overpaid considerable amount

claire-craig

Hi, in need of some payroll advice if possible as the customer has contacted HMRC and were advised the correction needs done within the payroll system, so wondering if anyone has come across this before? Ijust want to clarify if my thinking is correct....

An employee was overpaid a considerable amount in period 4 (July) of this year which has only came to light in October.
The employee should have been paid £1,197.00 but was accidentally paid £11,197.00 - so overpayment of £10,000
which cannot be fully recouped by either reducing the employee's pay or even paying the employee zero pay for remainder of tax year..

If the employee is willing to pay back the full amount less what they should have received, I'm assuming it would just be a case of continuing to pay the employee as normal and then make a Prior Year Full Payment Submission to adjust the figures?
however
If the employee is unable to pay back the full amount and agrees to receive NO pay (or a greatly reduced pay) as they would be unable to repay the whole amount in the remainder of the tax year, am I right in thinking that the Prior Year Full Payment submission will still need adjusted but only for the difference of what was owed and what has been paid back?
How does the employer re-coupe what is still remaining in the next tax year?

This one is really pickling my head, any help at all would be greatly appreciated.
Regards
Claire

tcyprys

Think I would setup the employee in a new group, and process the employee in that group year to date, and without the mistake. Do not process any FPS at this stage for that group.

Taking usual precautions - backups etc, mark the 'live' employee as X type leaver to remove them from the payroll (this will need to be done the period prior to the next part of the correction).

Then transfer the employee from the new group to the 'live' group, ensuring you give them the same employee reference. Send a revised FPS for that one employee.

The overpayment can be dealt with outside of the PAYE system as you see fit i.e. the debt can be repaid in full or over a period by deducting from the employees payroll account; a reducing balance loan effectively.

Obviously, check this process for yourself and do your own testing so you are happy this is a good way forward, as I haven't tested this myself - it is just my thoughts on how I would initially approach it.