Payroll Errors Lead to Overpayments

Local 21 Representatives Meet with Controller’s Office

This was originally sent as an email to more than 800 Local 21 Represented employees in the City and County of San Francisco who we believe received overpayments on the November 20th payroll.  As we reported earlier and as we believe everyone has been notified by the City of the error, Local 21 represented employees in DPW and PUC who had any paid leave time for that pay period were paid twice for the number of hours of paid leave.

Yesterday Local 21 met with the Controller’s Office yesterday to review issues related to the overpayment payroll errors on the November 20th payroll.  We had a number of questions and concerns related to the overpayment and we relayed concerns that our members have expressed to us.

Higher Deductions

Members expressed concerns to us that various payroll deductions based on a percent of earnings increased proportionately with the overpayment.  Those deductions will be offset with the recovery payroll of December 4th and December 18th.  Local 21 has already been notified that our union dues received for the payroll of November 20th was an overpayment which will be offset over the next two payrolls.  All other payroll deductions that are set as a percent of earnings will similarly be offset.

Paid Leave Accruals Affected

Because the payroll error concerned the overpayment for paid leaves, affected employees leave balances were also affected, both as to double deductions for the excess leave paid and for small incremental increases to their balances based on excess paid leave days taken.

Higher Tax Brackets

We were also concerned that employees with very large overpayments may have been negatively affected by being pushed into a higher tax withholding bracket.  For most employees this will be corrected by the lower earnings with the two subsequent recovery payrolls, but some employees with very large overpayments may still have a slightly higher than normal withholding for the tax year.  The Controller’s Office agreed that for employees who believe they still have a higher than normal rate of withholding for the year caused by the overpayment of November 20th and where this is not offset in the two subsequent payrolls they will perform an analysis to determine the amount of excess withholding and do an off-cycle paycheck to compensate the difference.  The employee’s W-2 withholding statement would then show a lower withholding amount representing the calculated amount of the offset check. If you believe you are in that category, please contact us and we will assist you in that review with the Controller’s Office.

 Note that in no circumstance should anyone have a higher tax liability for the year.

Overall Tax Liability

This is a very important point and it was clear when the City contacted us with the information about the overpayments that all of the affected members would have a higher tax liability for 2012 if the error was not corrected in this year.  This would mean a higher tax liability, not just a possibly higher withholding tax bracket.  Corrections if not completed before the end of December would mean the individual’s tax liability would not be offset until 2014 for the 2013 tax year.

Prevention of a Recurrence

We also asked how an error of this magnitude could have occurred and what steps were being taken to prevent a recurrence.  The response was that a part of payroll processing includes the running of a number tests before payroll is completed that attempt to identify errors or at least the possibility of errors.  In this case the error was not caught as the payroll had grown by a significant amount of new employees and the differences overall with previous pay periods was not significant given such a large payroll.  They have since instituted new and further testing to catch errors such as this before payroll is completed.

Disputed Overpayments

Lastly, we asked the Controller’s Office if they would work with us to correct any mistakes in the amount of overpayments if they are brought to our attention.  They said they would be glad to, but asked that the individual employees who believe there are still errors with the corrections work with their department payroll representatives first.  If a problem still exists, we will gladly take each error forward to the Controller’s office for correction.

Needless to say, this was not an insignificant payroll error and coming at the end of year prior to the holidays puts an extra burden on everyone, especially employees struggling in this economy.  While for some individuals it may have been better to have the repayments spread over a longer period of time, not completing the repayments before the end of the tax year would have negatively affected everyone.

We recognize the problems this has created all around and that there may still be errors in the corrections.  If those issues cannot be adequately explained or corrected by department payroll representatives, we will intervene with the Controller’s Office to seek corrections.