Paper Trails

Incorrect employee pay

What to do if an employee was paid incorrectly

Mistakes happen when running a business. Whether it is forgetting to pay an invoice, selling damaged product, or incorrect scheduling, human ever is bound to occur. One mistake that can happen to any business is paying an employee incorrectly. But, what should you do if an employee was paid incorrectly? Let’s take a look.

How can an employee be paid incorrectly?

There are many mistakes that can happen during the payroll process that will result in an inaccurate paycheck received by an employee. First, the employee’s timecard may be incorrect. The employee may have forgotten to clock in or out on time and a manager never made an adjust to the timecard. Secondly, maybe a manager manual entered a punch wrong into the payroll system and did not notice before processing. Third, maybe the amount withheld in payroll taxes from the employee was not the right amount, resulting in higher or lower pay for the employee. Lastly, the employee may have needed a certain payroll deduction or wage garnishment taken from their paycheck that was not taken. All of these these can lead to an employee be paid an inaccurate paycheck.

What to do when an employee is paid incorrectly

The most important thing to do in this situation is not to wait. Especially if the employee was underpaid, it is in your best interest to pay the employee the difference immediately.  Per the Fair Labor Standards Act (FLSA), wages are due on the regular payday for the pay period covered. Furthermore, Maine law states that “at regular intervals not to exceed 16 days, every employer must pay in full all wages earned by each employee. Each payment must include all wages earned to within 8 days of the payment date. Payments that fall on a day when the business is regularly closed must be paid no later than the following business day.”

So, when an error occurs and results in an underpayment, the employer is technically in violation of the law, even if it was a system error or caused by an employee’s timekeeping mistake. Fix these underpayments immediately.

Additionally, per the FLSA, employers that make a one-time overpayment to an employee can recoup the overpayment by deducting that amount from the employee’s next paycheck. However, it may be best to deal with overpayments immediately. Waiting to notify the employee or pull back the funds can result in the employee spending the extra money that was given to them. When it is time for them to payback the overage, they may not have the funds to do so. Or waiting to deduct the amount from their next paycheck can cause financial disruption for them.

Why is it important to pay employees correctly and fix mistakes timely?

Again, we are all human and mistakes happen. However, the more mistakes that occur with your employees’ pay, the higher likelihood that employee morale will suffer. In this time of the Great Resignation, it is important to keep your employees engaged to increase retention. Furthermore, errors in your employees’ pay not only causes an administrative headache, it can be costly for your business. The Department of Labor has cracked down on these mistakes and increased penalties on employers.

Be sure to careful review your employees’ timecards and preview your payroll before having it processed. It is worth the extra time to avoid these mistakes. Outsourcing your payroll needs to a third party vendor can help in eliminating these errors. Contact us if you are looking for assistance with your payroll process!