Jump to other news and events
Purdue signature

Wage Overpayments

Identification and Reporting:

Any individual who knows or believes that an employee has overpaid should contact the business office of the paying department immediately. 

The business office of the paying department will research the possible overpayment.  If the business office determines that an employee has been overpaid, they will contact the Payroll Department and report the overpayment.

Verification and Calculation

The Payroll Department will work with the business office of the paying department.  The business office of the paying department will investigate and provide the actual work dates, leave dates, and approved wages.  Payroll will prepare a Was-Paid/Should-Have-Been-Paid worksheet showing the amount of overpayment including all reductions and deductions. 

The Policy/The Law

Repayment of all wage overpayments will be pursued.  Repayment is expected in full.  The Comptroller is the authorizing individual to make any final decision should repayment be written off or repaid in an amount less than the full amount.

Federal law treats wage overpayments the same as any other wages the employee might have received.  As long as the employee repays the overpayment within the same taxable year that the overpayment is made, all taxes may be refunded and the employee’s W-2 may reflect the correction for the repayment of the overpayment.  If, however, the repayment is received after the end of the tax year in which the overpayment is made, the W-2 cannot be changed for Federal Income or Indiana taxes.  Only Social Security taxes can be refunded. 

Because of these federal law circumstances, if the repayment is made in the same year as the overpayment, the Payroll Department will request “net pay” as the reimbursable amount.  If the repayment is not made until a later tax year, federal law requires the Payroll Department to request “gross pay” as the reimbursable amount. 

Repayment Process

The paying department will prepare a letter to be given to the employee that explains the cause and amount of overpayment and requests immediate repayment.  This letter will constitute the “notification of overpayment”. 

Repayment should be made in full immediately.  However, some overpayments may be substantial and an immediate repayment may be a financial burden to the employee.  The Payroll Department prefers to work with the employee’s business office to identify a mutually agreeable repayment solution. 

Immediate full repayment

If the employee makes immediate, full restitution, the repayment will be sent to the Payroll Department immediately.  The Payroll Department will process a CRV to deposit the repayment into Undistributed Payroll account and will process the adjusting payroll transactions to account for the repayment. 


Should the employee not respond within 30 days of “notification of overpayment” or should the employee respond negatively to the request for repayment of any wage overpayment, the paying department will immediately inform the Payroll Department. 

The Payroll Department will determine the amount of the repayment and will process a CARS transaction to bill the employee and to implement an immediate encumbrance.  When and if repayment is made in full, the Payroll Department will process CRV’s or JV’s to deposit the repayment into Undistributed Payroll account and the adjusting payroll transactions to account for the repayment.

Several people ask why the Payroll Department must be involved?  Why shouldn’t the departments just handle it themselves?  The reason the Payroll Department must be involved is to help calculate the amount of overpayment, to account for the repayment, and to properly distribute the funds.

Questions will be answered by the Payroll Department.