How Can We Stop Losing Money on Overpaid Salaries After Employee Resignations?

Issue of Overpayment Due to Resignations

I have a serious issue here where the company is losing money on employees. It's unfair to lose money on employees who do not perform.

The HR administration closes on the 20th of the month for absences/sickness, etc. This information then goes to the Payroll department. However, the Payroll department pays the employees from the 1st of the month until the 30th/31st of the month. Anything that occurs between the 20th and the 30th/31st will be either deducted or included in the next month's salary payroll.

Employees are aware of this process. After receiving their pay on the 25th of the month, they resign. The company has already paid them until the 30th/31st of the month.

This situation is particularly challenging for a newly established company, and we find ourselves unable to take any action since we cannot deduct the overpaid amount.

Is there a solution to this issue? How do other companies handle similar situations?

Your help and advice would be greatly appreciated.

Regards, Vishkrish

There are ways you can handle the situation. Below, I have mentioned two points that came to my mind:

- You can keep your payroll from the 1st to the 30th/31st of every month. However, attendance should be submitted to your payroll department on the last day of the month. Once they receive it, they can either stay back and release the salary on the 1st of every month, or you can change your salary date to the 2nd or 3rd.

- Alternatively, you can change the cycle from the 24th to the 25th of every month and then pay on the 1st.

If you are a startup and have fewer employees in the company, your payroll department can stretch a little to accommodate these changes.

I hope this helps.

Best regards

If your HR administration closes the month on the 20th, then why does your payroll department continue to calculate for the remaining days of the month? You can redesign your payroll process in accordance with the HR administration. Calculate the month from the 21st to the 20th (for example, from January 21 to February 20) as one month and pay on the 21st of February as the salary for January. Start from the 21st of February as another month and continue it until the 20th of March, then pay on the 21st of March as the salary for February. In this process, if an employee leaves on, let's say, the 25th of February, then you can pay from the 21st to the 25th, i.e., for 5 days for the month of March, as February has ended on the 20th for your payroll system.

Regards,
Ramya Ranjan

Addressing Payroll Timing and Employee Resignation

Further to pushing your cycle ahead to the 25th/26th of each month, you can inform employees about this change during their onboarding process. Any excess salary can be deducted from the full and final settlement of the employee's dues.

Thank you.