Unpaid Wage Supplement

Procedures for Payment of Supplemental Wages

An investigation of facts and circumstances surrounding an employee’s pay may discover a department has underpaid the employee and a supplemental payment is required.  The investigating entity will meet with the management of the department of the underpaid employee and, together, they will develop appropriate resolution to the problem.  When this is determined, the investigating entity will prepare a report detailing such findings of unpaid wages.

The Internal Revenue Service (IRS) considers these payments as supplemental wages.  The IRS allows employers two ways to tax supplemental wages.

1.  Include the supplemental wages along with the employee’s regular wages.  Taxes will be withheld as if the total were a single payment for a regular payroll period.

2.  Pay the supplemental wages separately and withhold federal tax at a federally provided flat percentage.

The University has elected to write supplemental wages as a separate check.  Therefore, federal taxes are withheld at the federally provided percentage for the year of the payment. 

The following steps are to be followed when a supplemental payment is to be made.

1)               Investigating entity generates a detailed report to the department and copies are sent to Compensation and Classification, and Payroll.

2)               Compensation and Classification addresses any training issues with the department contact identified in the detailed report.

3)               Compensation and Classification notifies Payroll to prepare an Invoice Voucher for payment.

4)               Payroll will contact a department contact for account distribution information if it was not noted in the investigation findings. 

5)               Payroll indicates on the Invoice Voucher a contact person (Business Manager) in the department to be called when the check is written.

6)               Payroll sends the completed Invoice Voucher to the department contact for proper signature.

7)               Payroll makes a copy of the Invoice Voucher and sends it to Compensation and Classification.

8)               Payroll manually adjusts the employee earnings and deductions year-to-date records to account for the supplemental wages.

9)               Compensation and Classification prepares a “Receipt and Release” document and will send it to the department contact. 

10)           The department sends the approved Invoice Voucher to Accounts Payable for processing.

11)           Accounts Payable notifies the department contact when the check is ready.

12)           The Business Manager will have the employee sign the “Receipt and Release” document and releases the check to the employee.

13)           The department sends the original copy of the signed “Receipt and Release” document to Compensation and Classification.

14)           Compensation and Classification will retain the “Receipt and Release” document for seven years.