Well, now what? For all you know that employee has spent that money before you even noticed your minor mishap. So what do you do now? Let it go? But its your company’s money! You have options, it’s just a matter of deciding which one works best for both you and the employee.
Option 1– Ask the employee to repay the funds. According to the CRA, if the employee returns the funds within the calendar year, they may repay you just the net amount as long as you are able to adjust or modify your next payroll remittance and it is within the same calendar year as the over-payment. You should ask the employee to repay the gross amount if no taxes were withheld (i.e. a contractor payment) or you are not able to modify your remittances within the same calendar year. With PaymentEvolution Payroll please contact us to see how we can help you with either of these.
*Note: The CRA does not consider the over payment amount to be salary, or any wages in the year that the employee received the over-payment if the over payment is due to a clerical error. Visit the CRA website to see if your specific case should be reflected on the employees T4.
Option 2– Make a salary adjustment in their next pay run. Chances are you may have paid the employee for a few hours too many. Simply make note of the error and make the adjustment on the next pay run and subtract the amount you may have over paid the employee. Make sure you clearly communicate this to your employee, and note that you may need to make some modifications to their ROE if you terminate them.
Option 3– Create a pay-back plan. Perhaps the over payment is large, or you may have noticed a week too late (and the money has been spent). Skipping the next pay run (or just not paying them next time) is not an option. You need to create a plan in which you can retrieve the funds in an acceptable amount of time. Be sure this plan works well for both you and the employee. The same rules apply as in option 1.
Option 4– (You probably don’t need to apologize for this one!) Let it go. If it’s a slight over payment, it may not be worth the time it would take the have the funds sent back and source deductions adjusted. On a more positive note, you can tell them it’s a bonus for their hard work (if you really need an excuse!)
Remember to review your pay runs before finalizing them. PaymentEvolution provides you with the option to review at any stage during your pay run before it is finalized. If you have any further questions or concerns, please contact your accountant or the CRA directly.