Deductions for Overpayments

April 13, 2006

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Generally, if you paid an employee too much because of a legitimate bookkeeping error, you can deduct the mistaken overpayment from wages, even if the deduction reduces the pay below the statutory minimum wage for a particular pay period.

However, a second rule says that if the deduction would cause a hardship, you should spread the repayments out over time. There isn't much government guidance on what would constitute a "hardship," so use your best judgment. It's also in your interest to work with the employee on this. If you don't leave an employee enough money to pay the bills due to some mistake the employee had no control over, chances are the employee is going to resent you and morale problems may result.