Overpaid Employee's

[WesleyT]

Hi, This is my first post here, so thank you in advance if you can help!

This is my first week as Finance Director and our Payroll service overpaid 3 employees. Our CSR at the payroll service said we should not recoup the overpaid wages on the next check, but that she would re-run our payroll report to reflect what the wages SHOULD have been, and then ask the 3 affected employees to write us a check back for the difference. (Not so sure this was the best idea.)

Anyway, the organization has always recorded payroll as a journal entry, so I entered the INCORRECT payroll as a journal entry so that the bank statements would match. I have also collected 3 checks from the employees for the difference that they were overpaid.

I am afraid that I do not know how to enter those overpayment checks into Quickbooks and make sure that the salary account and witholding tax accounts are debited correctly. Can anyone help?

Also, we collected the difference in NET pay, not the difference in GROSS pay. Is this correct?

I am afraid that the payroll company might be getting away with crediting our account for a higher amount this way than they would if it had been run correctly.

What a way to start off huh? Thank you to anyone who can help!

[RobJoy]

You should be able to do a journal for each employee to reverse part of the pay, first line credit to the bank for the amount reimbursed, then break it down into the gross difference and deductions differences - that should fix all the figures. E.g. 50.00 cr reimbursed made up of 65.00 dr gross, deductions 5.00 dr and 10.00 dr to the relevant deduction accounts.

As to the amounts, if they calculated from the wrong gross pay to start with, surely the reimbursement is not just the difference between that and the correct gross pay, the deductions will have been different, so they repay the difference in the nett amounts. Unless I'm completely misunderstanding what happened.

[WesleyT]

Thank you... yes, I see that you are right. I think that the amount that the employee reimbursed me is the amount that should be credited to our "salaries" account in QB. The payroll service should reimburse us the difference between the amount of deductions that they took at the INCORRECT pay level, and the amount of the deductions they should have taken at the CORRECT pay level. This amount will then be used to adjust our "deduction" accounts accordingly.

Does this make sense?

[RobJoy]

Sorry, I'm not deliberately trying to confuse you, put it down to Friday afternoon stupidity.

I'm assuming that you are responsible for paying over your employees' deductions to Big Brother. If that's not so, maybe I shouldn't stick my oar in to non-UK payroll questions.

Presumably your usual journal looks something like:

Cr bank - nett pay
Dr gross salary expense - gross salary amount
Cr deductions liability - employee deductions

You've done that for the amounts actually paid.

Now you get a reimbursement for the nett overpayment from your employee, so you do a partial reverse:
Dr bank - reimbursed amount
Cr gross salary - overstated gross pay
Dr deductions liability - overstated deductions