If an employee has been overpaid, corrections will need to be done in BrightPay to correct this overpayment.

Identify the Overpayment

• Review payslips and payroll reports.

• Confirm the amount overpaid to the employee (if an employee has been overpaid, their taxable, USC-able & PRSI-able gross for that period would be higher than it should, thus their YTD information is incorrect).

Decide on the Correction Method

You have two main ways to correct the overpayment:

a) Adjust in the Next Pay Period

• This is the most common approach, however this can also depend on the amount overpaid (ie if it will create a negative payslip in the next period).

• Deduct the overpaid amount from the employee’s next payslip as a negative adjustment - this can be done by adding another line with a negative amount under the 'Pay' section, reducing the periodic gross by the overpayment amount or by adding a deduction type under the 'Additions and Deductions' section.

b) Employee repays the amount back to the employer

• This would involve taking note of the current take home pay (paid to the employee) and re-opening the payslip, removing the overpayment / adjusting the salary or hours.

• The difference between the new lower take home pay and the amount the employee was actually paid, would be repaid by the employee directly to the employer.

• This option would require a correction PSR to be submitted to Revenue so they can update the employee's actual pay and YTD records.

Note: If correcting the overpayment period, this may reduce the pension contributions that were paid to your pension provider / NAERSA (if these have already been submitted). Log into the pension portal and manually adjust the employee and employer amounts for that period. If your pension provider has closed the schedule, you will need to contact them directly to discuss what action is required. Pension amounts (once submitted and accepted) cannot be amended via BrightPay.

If correcting in the next period, the pensionable gross will already be reduced based on the lower gross pay so no further action is required - submit to your provider / NAERSA as usual.

Adjust the Employee’s in BrightPay

• Open the employer in BrightPay Cloud.

• Go to the next pay period after the overpayment.

• Add a negative adjustment or manual deduction under 'Pay' or 'Additions & Deductions'.

• Finalise and submit PSR for the period.

The overpayment will reduce the employee's taxable, USC-able & PRSI-able gross in this period by the amount of the overpayment. Take caution with this option if the overpayment was very large (ie a bonus or commission was too high) and this results in a negative payslip in the next period. Whilst you can process a negative payslip without issue, you will want to inform the employee of the impact of this correction.

Inform Revenue

• If reducing the next periodic pay by the amount, Revenue will accept the PSR with the lower periodic pay and add the information to the employee's YTD records. Depending on the amount of overpayment, you may see a significant reduction in the tax normally due or even a tax refund - this would be expected with large overpayment corrections.

• If you are re-opening and correcting the payslip in the overpayment period and the employee is repaying the money to the employer, ensure that a correction PSR is sent to Revenue for that period. This is essential if the employee is paying back the overpayment, so Revenue can keep their records correct and up to date.

Communicate with the Employee

• Let the employee know about the overpayment and the plan to correct.

• Provide the employee with a new payslip if you are re-opening and correcting the overpayment period. If correcting in the following period, simply provide the periodic payslip as usual.

If Tax/USC/PRSI is Overpaid

• The adjustment in the next period will reduce the employee's taxable, USC-able & PRSI-able pay, so the employee’s tax and other contributions will be correct in your PSR submission. Expect the tax, USC and PRSI deductions to be lower than normal for this correction period.

• If re-opening the payslip and correcting, the correct tax, USC & PRSI will be applied by BrightPay based on the amount / adjustments made on the payslip. Submit a correction PSR.

• If the PAYE / USC / PRSI liability was already paid to Revenue on the overpayment, it will be corrected in subsequent tax periods as the liability will be lower. In the case where you are correcting the overpayment payslip and Revenue has already been paid - the correction PSR submission will inform Revenue of what liability was actually due, thus creating a credit with Revenue. This will be balanced out by reducing the amount due in the next tax month.

For Significant or Historical Overpayments

• If the overpayment relates to a previous tax year, navigate to the relevant tax year in BrightPay.

• Re-open the payslip and make adjustments in that years' payslip.

• Finalise the payslip and submit a Correction PSR for the affected period(s) to Revenue.

• As this will create an amount owed by the employee to the employer, but cannot be recovered within the same tax year (as that tax year is now closed) - a net deduction for the employee can be made in the current tax year. Important note: This has to be a net deduction and not a gross deduction - as the Correction PSR has already been made for a previous tax year, the employee's taxable / USC-able & PRSI-able gross should NOT be reduced in the current tax year also. The employee would owe the employer the difference between what was actually paid to the employee and the new take home pay showing after the corrections were made.

• Inform the employee and make arrangements for this amount to be recovered. Small amounts could be taken from one pay period, but you might want to spread larger amounts over several payslips so the employee's take home pay doesn't reduce too much.

Example; the net overpayment in a previous tax year was €80 - this could most likely be recovered in 1 pay period. If the net overpayment is €800 - you might want to arrange with the employee that this recovery will be spread over 4 months at €200 each.

You will need to contact your pension provider / NAERSA directly if the correction in the previous year has reduced the pension figures. Corrections for pensions already submitted and accepted cannot be made via BrightPay.

If the employee is a leaver and no longer works for the company - therefore recovering the overpayment cannot be done in the next pay period or the employee is no longer reachable to return the overpayment to the employer - we advise that you speak to Revenue before making any adjustments in payroll.