Payroll Deductions for Overpayment of Wages
Overpayment of wages can happen for various clerical reasons including:
- Incorrect manual entry
- Timeclock errors
- Paid wrong employee
- Miscalculations
- Appointment changes/updates
Under Michigan law an employer is allowed to make payroll deductions from wages without written consent as long as:
- Overpayment is less than 6 months old
- Employee is notified one pay period ahead of time in writing (email okay)
- Deductions do not exceed 15% of gross wages or reduce wages to less than minimum wage
If preferred the employee can sign a Repayment Agreement Form if they would like a lower amount (<15% of gross earnings) and/or increase the number of future paychecks deductions will be taken from to repay what was overpaid.
If an overpayment occurred more than 6 months ago, the employer is required to have written consent from the employee before setting up payroll deductions. We use the Repayment Agreement Form to document written consent and the deduction schedule.
If an employee that was overpaid more than 6 months ago refuses to sign a repayment agreement it does not negate their responsibility to repay what was overpaid. In these cases, the employer is allowed to seek repayment by other means that does not involve payroll deduction. At UM, an invoice is set up by the Accounts Receivables Office and sent to the employee requesting repayment. The employee can then make payment arrangements with that office.
If payments are not made in response to the invoice the overpayment can be sent to a collection agency for further effort to seek repayment. There is no cost to the employer to send to collections. If the agency collects payments from the employee they will deduct a fee for each payment they collect.
References:
Salary Transfer Requests
If an employee is paid on an incorrect short code(s), a salary transfer can be requested to move the charges to the correct short code(s). Use the Request for Salary Transfer Form which can be found on the Business & Finance website to request a salary transfer.
Completed forms, as well as questions about the process, should be submitted to the University Payroll Office. Contact information can be found directly on the form.
Salary transfer forms should not be sent to the U-M Health HR-Payroll Office.
PTO Accrual Availability for Non-Union Employees
Per the PTO Policy IV. E.: The monthly PTO accrual is effective and available for use on the first day of the month for which it is accrued or during the bi-weekly pay period which includes the first of the month for which it is accrued, except when a status change occurs during the accrual month.
This means that biweekly-paid, non-union employees are allowed to use PTO accruals for any given month at the start of the biweekly pay period in which the first of the month falls into.
If there is a possibility for the employee to lose half or all of their accrual due to anticipated extended sick, maternity, and/or no-pay hours that will be used in the month, departments may hold off on reporting PTO accruals until it is known they will be eligible for it.
Refer to the PTO Policy IV. F. for more details on the accrual reduction policy, and the PTO Accrual Reduction Chart for accrual reduction thresholds by FTE.