Case Problem Ch 1 Payroll Accounting

The Need for Payroll and Personnel Records: Case Problem

C1. Paychecks Kept Coming

Ken, a salaried employee, was terminated from his company in April of this year. Business had been slow since the beginning of the year, and each of the operating plants had laid off workers.

Ken's dismissal was processed through the Human Resources Department, but the information was not relayed to the corporate payroll office.

As had been the policy, checks for workers at remote sites were mailed to the employees. The mailing of Ken's checks continued for the next four weekly paydays. It wasn't until the monthly payroll reports were sent to Ken's supervisor that the error was detected.

Ken refused to return the four extra checks. What actions should the company take?

Since Ken was let go and still received checks after the fact any wages that were not entitled to him are considered an over payment of wages and can be requested to be repaid to the company. First the company should make sure all errors involving the dismissal and finalized to ensure Ken does not receive any more checks. Next the company should check its employee records to find out the exact amount that was over paid to Ken during the four weeks before they caught the error. Then that company can request the paying back for over payment. Since Ken refused to pay back any unearned wages, the company’s only option is to take the matter to court, which may cost the company more in legal fees than in what was over paid.