What’s a radical, ethical solution to overpayment by employer?

June 2, 2023 5:13 AM

Is there any way to avoid forcing the employee to repay?

I am in middle management, and a part-time employee at my work has been overpaid for several month due to a Human Resources error. The awful catch is that they just found out their child has a incurable, life threatening disorder which will be very costly to treat. HR has already informed them that they will be expected to repay in full. HR were not aware of the atrocious timing, but legally (in our state in the US) they are entitled to take the money out of the employee’s paycheck. Employee is furious but does not have the energy for this particular fight.

I know the legal process. I know this happens all the time. But it SUCKS. What’s a radical, ethical solution to this problem, if any? Please assume a somewhat bureaucratic nonprofit situation, where our department has more radical guiding values than the rest of the organization. And a radically kind management style and organizational culture. Not corporate. Two things I can think of:

1. Forgive the overpayment, or officially retroactively move this employee to a different pay grade. This could set a dangerous and weird precedent, I suppose. The funds could come out of our department’s budget, but HR & payroll are centralized, so I’m anticipating I won’t be able to get a yes on this.

2. Anonymous donation? I think I could convince my boss to split the cost with me and donate to cover the overpayment. Any way we could make this work without employee involvement, or would we need to just write them a check? I don’t love the latter - I’d rather sort this out somehow without involving them.

I know both of these are long shots - do you have any experience with a similar situation, which was resolved somehow?

Please do not respond with “this is just how it goes,” or any legal information unless it supports my end goal, which is that the employee gets to keep the overpayment without hassle. I know I keep saying radical - but I want to be clear I’m thinking of justice in a moral sense, and not what is legally permissible

Lastly, if you have advice about how to just discuss the matter in a kindly, empathetic way, or help with damaged employee morale (for the entire team, who are generally aware and frustrated), that would be helpful.

posted by anonymous to Work & Money (23 answers total)

Sounds like your company is large enough to have an official "give money to the community" program. I'd write a letter to them, and:

May as well write a letter to the company president, CEO, etc.
posted by amtho at 5:42 AM on June 2, 2023 [2 favorites]

Figure out who in the corporate structure above you has the authority to fix this (hopefully with your option 1). Meet with them and pitch that it's the humane thing to do, that it won't break the bank or set a dangerous precedent (and will keep HR on their toes not to do this again). And if you get pushback, describe how bad it would look for the company if a news story comes out about how they took money out of the employee paycheck right after their child's diagnosis, fully knowing what was going on, when it was the COMPANY's error, not the employee's. Tell the supervisor that you're not making any kind of threat, but that you know for a fact that this story WILL get out, too many people already know about the situation, and it would cost the company far less to just quietly sew this up with a little compassion and not look like the bad guys. It's a shame to have to resort to threats, but when a company insists on being inhumane for the sake of policy, you have to be prepared to hit them where it hurts.

I'm sorry this is happening around you, but I'm happy that someone like you is in there trying to make them do the right thing.
posted by rikschell at 5:42 AM on June 2, 2023 [9 favorites]

Oh, how hard. Thank you for trying.

How about a verrrrry slow repayment plan? HR might go for that if the department agrees to backstop any uncollected funds in the case that the employee leaves before payment is collected in full. So, like, $20/paycheck, knowing that that may effectively mean not fully repaying for years?

Second idea, does your org have an EAP (employee assistance program?) Some places have such a thing that can give limited funds in an emergency. Given the diagnosis, this might qualify and perhaps HR would consider "disbursing" an amount equal to the overpayment.
posted by Ausamor at 5:46 AM on June 2, 2023 [1 favorite]

I was overpaid once, however not such a large amount. The way that my company handled it was to let me set the repayment schedule. Eg. Repay $50 each pay until it was paid back.
posted by kinddieserzeit at 5:48 AM on June 2, 2023 [2 favorites]

Organizations are allowed to just do nice things even if they cost money. When my husband died, his former employer simply gave me a significant chunk of money (I've forgotten exactly how much but it was maybe 3 months of his salary), free and clear. He hadn't even worked there that long. I have no idea where it came from in their budget but they just did it. Most organizations would not make that choice, and many have rules that actively prevent them from doing so, and many have stockholders (or stakeholders) who would complain that just giving an employee money is a misuse of funds.

So, basically your option 1 is possible but it sounds like HR has decided against it. I think it's worth appealing that decision. If they insist on repayment maybe you could still advocate for a long repayment schedule, like $1-5 per paycheck.

If you appeal to HR, I would make it clear that 1) this is terrible timing; 2) you don't want to lose a good employee over *their* mistake (because this is totally the kind of thing people quit over). Also it only sets a dangerous precedent if they keep making payroll mistakes.

Your option 2 may or may not be allowed - you'd have to ask HR what they'd permit.
posted by mskyle at 5:50 AM on June 2, 2023 [9 favorites]

I work in HR and have been successful in the past just presenting a brief case to leadership and getting an okay. (By presenting a case to leadership, I mean, going for a walk with my CEO, saying hey, I think the right thing to do here is XYZ, is that okay? And the CEO says yes, and I take care of the logistics.) It is perfectly within the rights of a company to say -- "Oops, we screwed up and overpaid you, but because it's our mistake, not yours, we will eat the cost. We're fixing it now and your new paycheck amount going forward will be X, but there are not any other actions you have to take and the overpaid wages will not be collected. Sorry for our mistake and any confusion we have created." Honestly, this is the organization's fault, and the employee shouldn't face anything that is OR FEELS punitive. Says I.

In your exact case, I would figure out who the most sympathetic figures at the top of the org are and engage them in this process. They have the power to make this call. If your boss is on your side, that's a good place to start and you and she should discuss who the highest power person is that you can get a sign off from -- CFO, CEO, COO? Someone up there is going to have a heart and believe that the right thing to do in the radical org they run is not take money away from this employee. Go on the coffee walk and talk I suggested above. Ask them to fix this because it's the right thing to do. Don't offer alternatives where other employees who may themselves be in precarious positions have to donate their salaries to cover the company's mistake. Says you to the boss: "It's an error the org made, which is the org leadership's responsibility, and the compassionate, reasonable, and easy thing to do is write off the overpayment. This will boost morale, show that the org owns their mistakes, and create goodwill, while also not putting this employee in a bad position."

Good luck!
posted by luzdeluna at 6:11 AM on June 2, 2023 [29 favorites]

Your company absolutely has the ability to eat their mistake, which is what they should do. The "weird precedent" is that HR should do their frickin jobs in the future.

I would be pissed enough to submit a formal request to have the overage paid back out of my salary instead, or taken out of my budget. Your boss can go in with you on it. This sets up a situation where they stand to lose at least two people over this, and hiring is way more expensive than retention. (I would say this last phrase multiple times in any discussion.)

If your company has a pretty reliable yearly compensation bump, you can propose postponing this employee's for however many months will true this up, but if you offer this solution you should still point it out as petty and bad retention policy.

I once made a coding mistake on a survey that then made it through QA with nobody catching it and we accidentally paid out around $8000 survey-completion rewards that we shouldn't have. The company had many good systems in place to prevent these accidents, and still sometimes something happens. Oh well! is the official company policy. We had extra post-mortems to figure out ways to catch that particular kind of error in the future. That's it, that's what was done about it. Learned from the mistake and moved on.

My entire industry, which is based in billable hours, plans for crediting back some amount money to clients along the project as basically a mood stabilizer. It doesn't come out of anybody's pockets, if we issue a credit for a real or perceived mistake it just is less money we make. (And also if a consultant is taking a beating on a hard project, we give them a little bonus to help get through it, just willy-nilly!)

Money is ALWAYS fungible if the people in power want it to be. Companies make expensive mistakes all the time and eat them. Your company has likely spent more on something gathering dust in a closet than they overpaid this one person. They are likely paying a low-productivity employee too much right now and not doing anything about it because it's too awkward. They've probably let other employees negotiate starting pay bumps bigger than this person's accident.

I would not, by the way, mention anything about the sick child. HR will do everything in their power to run this person off to prevent the insurance increases they'll have to partially pay for. They're going to figure it out, of course, but I wouldn't raise it now if it can be avoided. HR is not, it's worth remembering, anybody's friend but the bottom line's.
posted by Lyn Never at 6:16 AM on June 2, 2023 [6 favorites]

Depending on the organizational power structures and politics, I might try to argue that HR should eat the cost as a lesson to them about being more careful and responsible stewards in future.

…that sort of thing can actually work in some organizations but it requires a very specific style from the top leaders and I suspect you’ll know if it can work or not in your case.
posted by aramaic at 6:41 AM on June 2, 2023 [3 favorites]

I agree with the slow repayment of the smallest possible token amount. If the employee leaves before it’s repaid the company can waive the balance at its discretion.

-It complies with the “letter of the law” without unduly burdening the employee.

-It’s not a bad precedent because the repayment schedule for errors should be negotiable in any overpayment situation. and the company has the final say in the negotiation.

I am never in favor of going out of pocket for company mistakes. I see where your heart is at in this but don’t let your company fuck your employee AND you. Talk about bad precedent.
posted by kapers at 6:41 AM on June 2, 2023

If it helps, the federal government absolutely has a "waiver" process by which an employee who has been overpaid can request forgiveness of the debt. As you can imagine, waivers are not granted routinely and decisions are based on individual circumstances--but there's no bigger or more bureaucratically-minded employer in the U.S, and yet they manage to do it from time to time.
posted by praemunire at 7:22 AM on June 2, 2023 [4 favorites]

Here's the thing: If this overpayment happened in the absence of the awful catch, what would have happened? HR would have instituted some repayment agreement to which the PT employee would have agreed, albeit grudgingly. Alternatively, if the awful thing happened in the absence of the overpayment, what would have happened? This is less clear, but perhaps the company would have agreed to some accommodation like paid time off, and would have contributed to a fundraiser held by employees. The situation you have combines these circumstances and should combine the outcomes.

So, look for a solution such as: (a) a temporary postponement of any repayment obligation, (b) agreement that repayment does need to happen eventually, perhaps starting a year from now, AND (c) a generous corporate contribution to any fund raiser held on behalf of the PT employee's family, whether among employees or among friends.
posted by beagle at 7:30 AM on June 2, 2023

I was in this position as the manager of an employee who this happened to. HR wanted the employee to pay it back, I ultimately said no and the employee kept the funds. I am long gone from the job, but the employee is not only still there, but now is running the show.

Do you want the employee to hate their job, their management, HR, and leave as soon as possible? Make them pay it back.

Do you want this employee to stay? Let them keep the funds. Period. Consider it an investment in the organization's future. Also, your HR is a mess.
posted by Toddles at 7:40 AM on June 2, 2023 [12 favorites]

I agree with the comments and reasons for letting the employee keep the overpayment. An additional argument to make to whomever has the authority to approve this is that letting the employee keep the money is also the easiest solution for the company. Managing a repayment plan would be an additional task for the payroll person to implement and track, adding steps to their payroll process and potentially creating the possibility of making another mistake. The easiest action for everyone is just to do nothing.
posted by veneer at 8:20 AM on June 2, 2023

I would emphasize the downside in the press as mentioned above. Picture the headline: “Self proclaimed ‘radically kind’ non-profit cuts paycheck of parent of terminally ill child.” Your organization, which presumably has donations, will lose money on that.
posted by kerf at 9:26 AM on June 2, 2023 [2 favorites]

If anyone should pay restitution - it should be the employee who made the mistake.

It will incentivize them to not make such mistakes in the future.
posted by rozcakj at 9:47 AM on June 2, 2023 [1 favorite]

The radical, ethical solution is obviously to not require anything of the overpaid employee. Inform them of the mistake and then resume paying them the correct amount. Perhaps the payroll/HR employees should face some consequences. That's it! The end!

I was once overpaid for a couple of months, and when my employer discovered the problem, they told me that because I was such a reliable and effective employee they were just going to let it slide, and make sure to pay me the correct amount in the future. I treated it as a sudden windfall. If they had told me I would be 'repaying' a 'debt' I would have immediately sought a different job.
posted by panhopticon at 10:57 AM on June 2, 2023 [4 favorites]

Any way this could be a one off bonus? Whatever may be an acceptable basis to declare it such.

Setting a precedent is ok - you’ll forgive any employer caused overpayments as long as they are discovered in the same fiscal year in which a dependent child is diagnosed with incurable, life threatening illness. Unless your payroll people are seriously incompetent the chances of that adding up to a significant budget line item should be low?

Is there any hardship fund/program for people to gift unused PTO that could be used?
posted by koahiatamadl at 11:17 AM on June 2, 2023

I'm always staggered when companies screw up and then make it the employee's problem. If their accounting department is that inept - and I'll call it that, because accounting is not something new and uncertain - why should the employee suffer?
It's pretty obvious that this is not a lot of money to the company. They didn't panic and try to find out where the money went, because they didn't notice. Someone picked it up later and thought, "It's not morally good for this employee to have this." They also didn't think, "We're to blame and we need to make this right." Large groups of people do not work that way. The employees must behave morally, the company must behave in whatever way money dictates.
If the company behaved morally, they'd chalk this up to experience. From the facts presented here, they should.
They shouldn't offer a repayment plan. That's an insult, and you might want to point out that having your employees look at you with disgust does not lead to them working hard and sticking around.
Will they do what's right?
Well, it's pretty certain that if they overpaid the CEO they'd let him keep it. You just need them to see every employee as a person, just like management.
I don't think that's impossible. Years back I got sick, working casually, so I didn't get benefits. It wasn't life-threatening, but I knew I'd be off for a month. My HR person said, "What's the problem? Obviously we'll pay you."
They treated everyone that way, and it led to a group of people who would break down walls and move mountains out of the way if the job required it.
Good managers know this. Sometimes they need to be reminded.
posted by AugustusCrunch at 12:22 PM on June 2, 2023 [4 favorites]

You can fight on their behalf, and I think it's worth doing. Like, just keep going upwards until you either get a different answer, or someone tells you that they could do it but they're not going to. Because there is definitely someone with the power to say that the organisation will eat the cost of their own mistake.
posted by plonkee at 4:46 PM on June 2, 2023

I agree the company should eat it. But if you can’t get that result, a raise going forward with the repayment being the difference between current pay & future pay, could even it out (and then the employee would get the raise after the repayment period). The wrinkle is if they have to leave due to child, HR could get weird about it.
posted by warriorqueen at 6:46 PM on June 2, 2023

Does your company give yearly bonuses? Could this be something that comes out of the next one?
posted by Aleyn at 7:29 PM on June 2, 2023

Mod note: From the OP:

Thank you for all your responses. This situation has now been resolved, although not at all in the way I’d hoped.

To reiterate, I did not have any say or power in this situation (middle management) but I took several commenters’ advice and kept going up the chain until I at least got an answer that made sense. This upset a couple of people and got me in trouble (a bit) but it was worth the capital and I trust my boss, who understood why I was so fired up.

The answer pertains to something I left out, though I was clear that I am not in a corporate environment: our salaries are paid with government funding (I don’t want to be more specific) and therefore our finances are audited by our state. It is not possible to do any creative accounting for this reason. I think it would be different in an independent non-profit.

Once I had gone as high as possible and gotten more clarity, I spoke with the employee. I stated that the communication was poor around this incident, that our immediate management was really upset on their behalf about both the mistake and the communication, and that we had done everything in our power to find another solution. Since we could not, as people we (three levels of management) offered to cover the cost of the repayment - personally, because the institutional rules wouldn’t allow it another way. I explained that we knew the employee might not want that, but it was there as an offer because we all agreed it wasn’t okay, but didn’t have power to otherwise fix it. The employee declined but said they were very touched, and that they felt supported. I think communicating with compassion and clarity was really the only thing in my power to do, and it turned out to be key.

I remain deeply frustrated by the whole affair, but really appreciated how many of you here shared my sense of injustice. Dang, it’s hard.

posted by taz (staff) at 10:36 PM on June 11, 2023 [4 favorites]

Since it comes down to government funding, it might be worth a visit with your elected representative. Sometimes there are strings that can be easily pulled if the right person is on your side.
posted by rikschell at 7:15 AM on June 13, 2023