How to Handle Overpayment on Severance Packages

A employee who has been fired may not be willing to pay back the funds.

Accounting errors are a fact of business life. Unfortunately, an accounting error may lead to a large overpayment on severance packages. This situation may, depending upon your location, place your company in a losing position. The only way to remedy a severance package overpayment is to protect yourself before the check is cut. A clearly outlined severance process that is explained to each individual employee at the time of separation is the best way to insure recovery of an overpayment.

Instructions

1. Draft a severance agreement for employees to sign at the time of layoff. Include a section in the agreement stating that the employee will receive a certain amount of pay. Add another section stating that the reason for layoff may raise, lower or eradicate the amount of that employee's severance pay.

2. Instruct your supervisors to have each employee sign the severance agreement at the time of layoff. Tell the supervisor to send the employee directly to the human resources department with a copy of the severance agreement.

3. Instruct the employees in your human resources department to review each severance agreement handed in by a laid-off employee. Tell the HR employees to immediately cut a check for the amount shown on the agreement and give it to the employee before escorting him out of the building.

4. Review your employee records monthly. Compare the reasons and amounts stipulated in the severance agreements to the checks paid out. Note any overpayments along with the reason, date and amount of the overpayment.

5. Send each overpaid employee a certified letter explaining the situation and requesting immediate repayment. Follow up with a second letter 30 days after the first if there is no response.

6. Visit your local civil court clerk. Submit your documentation and fill out the paperwork necessary to file a lawsuit against the ex-employee for the amount of the overpayment plus court costs.

7. Attend court on the appropriate date. Explain the situation to the judge. Tell her your company policy concerning severance packages as well as the specifics of the of the severance agreement signed by the employee.

8. Request an immediate judgment for the full amount of the overpayment and court costs from the court. Ask the judge to attach a garnishment order to the judgment so that you can retrieve your money sooner.

Tips & Warnings

• Fraud is a felony. Always be completely honest and thorough in all of your business, financial and legal dealings. Inaccurate or fraudulent claims in this situation will result in civil fines and criminal prosecution.

References

• CIO; Severance Pay Mistakes: A Quick Guide to Employee Rights; Meridith Levinson; February 2009