1 PURPOSE APPLICATION GUIDELINES DELEGATION REFERENCES SUPERSEDES POLICY DEBT WRITE-OFF...

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1 Overpayments C48 Human Resources Policy Effective Date: TABLE OF CONTENTS 1 PURPOSE APPLICATION GUIDELINES DELEGATION REFERENCES SUPERSEDES POLICY Identifying overpayments Agreement for recovery action Repayments Responsibilities of employees Responsibilities of line managers Responsibilities of QHSSP Overpayments resulting from an employee s absence from work Recommended repayments for other wages overpayments Grievance procedure Impacts on year to date earnings and payment summary records Overpayments current financial year Overpayments previous financial year(s) Overpayments spanning current and previous financial years Follow-up action required to facilitate the recovery of the overpayment Referral of overpayment to Finance Services QHSSP Reporting of overpayments DEBT WRITE-OFF Circumstances for debt write-off of overpayment Write-off delegation Adherence to policy TAXATION Taxation implications Calculation of taxable value of loan fringe benefit DEFINITIONS HISTORY... 14

2 1 PURPOSE HR Policy C48 To outline the process for the recovery of overpayments to employees. 2 APPLICATION This policy applies to all Queensland Health employees. This policy does not apply to: contract staff or staff engaged through private agencies who are not directly paid by Queensland Health situations when an employee has deliberately obtained monies from Queensland Health that they have no entitlement to receive. These cases are to be referred to the Ethical Standards Unit (ESU), the Queensland Police Service (QPS) and the Crime and Misconduct Commission (CMC). 3 GUIDELINES Guidelines may be developed to facilitate implementation of this policy. The guidelines must be consistent with this policy. 4 DELEGATION The delegate is as listed in the Queensland Health Human Resource Delegations Manual as amended from time to time. 5 REFERENCES Industrial Relations Act 1999 Industrial Relations Regulation 2000 Fringe Benefits Tax Assessment Act 1986 Financial Accountability Act 2009 Queensland Health Financial Management Practice Manual (FMPM) Standard Practice 1 Wage Overpayments (CorpTech, Department of Public Works) Public Sector Industrial and Employee Relations (PSIER) Circular No. C3-09 Arrangements for salary packaging from 1 July 2009 (as amended from time to time) FBT Business Procedure Loan Fringe Benefits Queensland Health Code of Conduct 6 SUPERSEDES IRM Recovery from Employees of Amounts Overpaid Due to Absences IRM Recovery from Employees of Amounts For Other Reasons 7 POLICY Queensland Health is committed to ensuring the accurate payment of wages and related entitlements to all employees. Overpayments Page 2 of 14

3 Overpayments are not intentional and can occur for a number of reasons. Action is to be taken to recover any monies in accordance with the provisions of the Financial Accountability Act 2009 (section 73). 7.1 Identifying overpayments Overpayments may occur for various reasons. These include, but are not limited to: delay in receipt of advice of a change in hours/leave without pay/separation incorrect or misinterpretation of advice administrative or data entry error. Payroll Services, Queensland Health Shared Service Partner (QHSSP) is responsible for investigating any possible overpayment. If it is found that an overpayment has been made, the QHSSP is to contact the employee concerned, provide details or evidence of the overpayment and how it may have occurred and discuss how the matter can be resolved. Employees may seek support or assistance from their relevant union in relation to overpayment management. All employees are encouraged to check their fortnightly pay advice. In accordance with the integrity principle of the Code of Conduct, if a discrepancy is identified in the pay advice or in the payroll credit to their bank account, the employee is responsible for notifying their local payroll team immediately by or phone. When timely notification has been made by the employee to the local payroll team and satisfactory action has not been taken to rectify the overpayment, an employee may register their complaint at Payroll_Complaints_SSP@heath.qld.gov.au. 7.2 Agreement for recovery action Employees have an obligation to actively participate in the recovery process and are to repay any overpaid wages. When seeking employee agreement for appropriate recovery action, consideration is given to the amount and nature of the overpayment, the circumstances surrounding the occurrence of the overpayment, and the total fortnightly wage payable to the affected employee. QHSSP and the employee are responsible for negotiating acceptable repayment terms. A written agreement to repay the debt is to be completed within a reasonable time frame by completing a repayment agreement form or equivalent written correspondence. A reasonable time frame is influenced by the repayment, as outlined in When the QHSSP and the employee cannot negotiate a suitable repayment schedule, people and culture managers may be included in discussions with the employee and the QHSSP to ensure an appropriate outcome with regard to the repayment schedule amount of the overpayment. However, the fact that overpayments must be repaid is not negotiable, except in circumstances outlined in 8.1. When appropriate, relevant people and culture managers and district CEOs are required to actively support the QHSSP in negotiating repayment arrangements and Overpayments Page 3 of 14

4 may also be required to provide support and guidance for the employee and advocate on their behalf in the negotiation process. The written consent of an employee is required before repayment deductions can commence from an employee s wages, except in circumstances outlined in When an overpayment occurs to an employee who is not at work (e.g. on leave), every effort is to be made to contact the employee to obtain consent. Contact attempts made by QHSSP are to be documented. The employee is to sign the repayment agreement form to confirm their acceptance of the terms of the repayment arrangement. When alternative written correspondence is used (such as ), appropriate authorisation from the employee is to be obtained as soon as practicable. 7.3 Repayments In determining overpayment repayments, the following factors are to be considered: The total amount of the overpayment. The timing of the overpayment. If the overpayment occurred in a previous financial year, the gross value is recoverable. The circumstances under which the overpayment occurred. The provisions in the Industrial Relations Act 1999 (section 396) relating to overpayments that occurred as a result of an employee s absence from work. A deduction for an amount that would reduce the employees wages for a pay period by more than 25% of the gross wages payable cannot be made without the employee s consent. However, the employee can authorise a deduction of a greater amount. Refer to Under section 396 of the Industrial Relations Act 1991: o Deductions are to commence within one year of the overpayment. o Deductions may extend over a period of six years after the overpayment. The recommended repayment schedule in The employee is expected to repay the full amount of the overpayment at the earliest opportunity. When an overpayment occurs in a lump sum and has or should have been readily detected, it is expected that the employee repay the overpayment in a lump sum without delay. When an overpayment occurs in a lump sum that is not readily detected, e.g. back pay, a repayment arrangement in accordance with the recommended repayment schedule may be entered into. Negotiations between the employee and QHSSP are to be undertaken in a confidential and sensitive manner. When an overpayment occurs systematically over a period of time, QHSSP is to negotiate an appropriate and reasonable repayment arrangement with the employee, including time frames and repayment amounts. Consideration is to be given to the employee s individual circumstances, the nature of the overpayment and the appropriate repayment schedule. Overpayments Page 4 of 14

5 For temporary employees, every effort must be made to finalise repayments within the term of their employment contract. The recommended fortnightly repayment is not intended to prevent the employee from consenting to a greater fortnightly deduction to finalise the overpayment more promptly. When possible, the total amount is to be repaid at the earliest opportunity Responsibilities of employees Once a repayment agreement is in place, it is the employee s responsibility to contact QHSSP to negotiate alternative arrangements to ensure continuity of repayments under the following circumstances: If the employee is intending to be seconded or transferred to another Queensland government agency. or if the employee is intending to take a period of leave without pay. or if the employee ceases their employment. When an overpayment exists at the time an employee ceases employment (e.g. resignation or completion of temporary contract) and agreement has been specified in the repayment agreement, the balance of the overpayment is to be deducted from any termination payments due to the employee. When the repayment amount exceeds the termination payment, QHSSP is to negotiate additional repayment arrangements with the employee. When an employee is unable to agree to the recommended fortnightly repayments due to genuine financial hardship or other extenuating circumstances, the employee is to return the repayment agreement with written advice outlining the reasons they are not able to meet the required repayments and a reasonable proposed repayment schedule. This is to be provided to QHSSP, and is then forwarded to the Executive Director, People and Culture Corporate for review. Further supporting documentation and other relevant information may be requested in order to make an informed decision on the issue of hardship. Hardship is not to be confused with inconvenience. Having to repay money to which there was no entitlement does not in itself represent hardship. When an overpayment schedule has been established with an employee and their financial circumstances change significantly, they may negotiate to pay a lesser fortnightly amount in finalising their overpayment. In these cases, the employee is to submit a new repayment schedule including the proposed new fortnightly amount with the relevant documentary evidence to support the request to QHSSP, which is responsible for forwarding this and other relevant information to the Executive Director, People and Culture Corporate for review Responsibilities of line managers Line managers are required to: Overpayments Page 5 of 14

6 contact QHSSP when they identify a discrepancy in their records that may result in an overpayment to an employee actively support the QHSSP in negotiating repayment arrangements provide guidance for the overpaid employee and advocate on their behalf in the negotiation process, if required. Line managers are required to complete the relevant forms for QHSSP in a timely manner, to advise of any changes to: an employee s leave without pay (particularly if extending existing periods of leave without pay) employee terminations other employment related issues that could have an impact on an employee s pay, e.g. change of standard hours, change in position Responsibilities of QHSSP If the employee does not make alternative arrangements to ensure continuity of repayments prior to: the employee being released to commence with a new employer on a secondment or transfer or a period of leave without pay or if the employee ceases their employment QHSSP is obliged to contact the employee (and when appropriate the delegate) to ensure appropriate alternative repayment arrangements are negotiated. When an overpayment continues to exist after an employee returns from leave without pay, the deductions are to re-commence from the employee s fortnightly wage as agreed in the repayment agreement. When an overpayment exists at the time an employee ceases employment (e.g. resignation or completion of temporary contract) and agreement has been specified in the repayment agreement, the balance of the overpayment is to be deducted from any termination payments due to the employee. When the repayment amount exceeds the termination payment, QHSSP is to negotiate additional repayment arrangements with the employee. When a significant overpayment has occurred to an employee, senior representatives from the QHSSP are to negotiate the repayment agreement with the employee, taking into consideration factors outlined in Overpayments resulting from an employee s absence from work The Industrial Relations Act 1999 (section 396) and Industrial Relations Regulation 2000 (section 17) provide for the direct recovery of overpayments without an employee s consent, only in relation to overpayments resulting from an employee s absence from work. Overpayments Page 6 of 14

7 In accordance with the Industrial Relations Regulations 2000 (regulation 17) a deduction cannot be made for an amount that would reduce the gross wages payable to the employee for a pay period by more than 25%, if the deduction is employer initiated under the Act. In circumstances when an overpayment results from an employee s absence from work, a repayment is to be made from the employee s next available pay up to a maximum of 25% of their gross wages. This amount is payable for the pay period in accordance with the repayment schedule below, unless there is agreement for the employee to repay a larger amount in accordance with a completed repayment agreement contract. Repayment schedule overpayments resulting from an employee s absence from work* Amount of gross overpayment Less than 25% of gross wages payable for the pay period Equal to or more than 25% of gross wages payable for the pay period Fortnightly repayment Repayment in full from the wages payable in the following pay period or repayments made by direct deposit into Queensland Health s designated bank account, or by credit card, or cheque/money order (made payable to Queensland Health). In most circumstances repayment is to be made via a payroll deduction from the employee s fortnightly salary. A repayment of 25% of the employee s gross substantive wage for each fortnight until the total amount is recovered, or repayments made by direct deposit into Queensland Health s designated bank account, or by credit card, or cheque/money order (made payable to Queensland Health). In most circumstances repayment is to be made via a payroll deduction from the employee s fortnightly salary. *This fortnightly repayment is not intended to prevent the employee from consenting to a greater fortnightly deduction to finalise the overpayment more promptly. When possible, the total amount is to be repaid at the earliest opportunity. When the employee is absent on leave without pay in excess of one month and an overpayment is identified, QHSSP is to contact the employee to advise the circumstances of the overpayment and to request repayment as per the terms of an appropriately completed repayment agreement form. Repayments are to be made by direct deposit into Queensland Health s designated bank account, or by credit card, or cheque/money order (made payable to Queensland Health) Recommended repayments for other wages overpayments In line with the whole-of-government standard practice, repayments are to be made in accordance with the recommended repayment schedule below (with the exception of overpayments due to absence from work). Overpayments Page 7 of 14

8 Recommended repayment schedule other wage overpayments* Agreed repayments to be detailed in the repayment agreement form Amount of gross overpayment Less than $2500 Greater than $2500 Recommended fortnightly repayment Repayment of 10% of the employee s gross substantive wages for each fortnight until the amount is recovered. Repayments may be made by direct deposit into the Queensland Health s designated bank account, or by credit card, or cheque/money order (made payable to Queensland Health). In most circumstances repayment is to be made via a payroll deduction from the employee s fortnightly salary. Repayment of 15% of the employee s gross substantive wages for each fortnight until the total amount is recovered or repayments made by direct deposit into the Queensland Health s designated bank account, or by credit card, or cheque/money order (made payable to Queensland Health). In most circumstances repayment is to be made via a payroll deduction from the employee s fortnightly salary. *This fortnightly repayment is not intended to prevent the employee from consenting to a greater fortnightly deduction to finalise the overpayment more promptly. When possible, the total amount is to be repaid at the earliest opportunity. When an employee is unable to agree to the recommended fortnightly repayments due to genuine financial hardship or other extenuating circumstances, the employee is to request alternative arrangements be made, in accordance with Grievance procedure If an employee has a genuine concern regarding the recovery of overpayments process, they may lodge a grievance in accordance with the Grievance Resolution HR Policy E Impacts on year to date earnings and payment summary records Overpayments current financial year When an overpayment occurs in the current financial year, the employee is required to repay the net amount (after tax and certain deductions) of the overpayment. Tax and superannuation are the only employee wage deductions that can be recouped by the QHSSP. QHSSP recoup these overpaid deductions via payroll adjustments through the HR solution in the current financial year. Other deductions, e.g. home loan repayments and health insurance payments, are considered net payments made directly to the employee. When repayments are outstanding at the end of the financial year for an overpayment that occurred in that year, the year to date amounts will not be altered. The payment summary for the financial year now just ended is unaffected by overpayment(s) in any prior financial year, whether repaid to any degree or not. Overpayments Page 8 of 14

9 7.4.2 Overpayments previous financial year(s) HR Policy C48 When the overpayment occurred in one or more previous financial years, the employee is required to repay the total gross amount of the overpayment. When the gross amount of the overpayment is repaid in full, QHSSP are responsible for preparing an amended payment summary adjustment letter. When the recovery of the overpayment has been referred to Finance Services QHSSP, they are responsible for the preparation of the summary of repayments (refer 7.5). QHSSP are required to provide an original copy of the amended payment summary adjustment letter and any related written advice to the employee, as well as an original copy to the Australian Taxation Office (ATO). Employees are to be advised to obtain information from the ATO or seek independent financial advice regarding a review of their income assessment for the relevant previous financial year(s) Overpayments spanning current and previous financial years When the overpayment recovery spans two financial years, the overpayment for the current year is recovered as the net amount (as per 7.4.1). The residual value of the overpayment of the previous year is recovered as the gross amount (as per 7.4.2) Follow-up action required to facilitate the recovery of the overpayment When there is no reply made by the employee following QHSSP verbal or written notification of the overpayment, it is the responsibility of QHSSP to follow up with the employee no later than 14 working days from the date of the initial correspondence or verbal contact. 7.5 Referral of overpayment to Finance Services QHSSP Under the following circumstances, QHSSP are required to refer the overpayment to Finance Services QHSSP to manage the recovery process: When upon identification of the overpayment, the overpayment relates to a former employee. When agreement cannot be reached between QHSSP and the employee as to the repayment terms. When there is no response from the employee within a reasonable time frame (14 working days from the date of last contact by QHSSP). QHSSP is responsible for completing an employee debt recovery form to ensure appropriate details of the overpayment are provided to Finance Services. Finance Services are to raise an invoice to the employee and follow standard debt recovery processes. When the overpayment has been finalised or the financial year ends, whichever occurs first, Finance Services is to notify QHSSP to develop a payment summary adjustment letter to show the financial year in which the overpayment occurred, and Overpayments Page 9 of 14

10 the amount received during the current financial year or the financial year just ended, as the case may be. Once debt is referred to Finance Services, recovery is to be undertaken as required, including engagement of debt collection agencies. Refer Financial Management Practice Manual (FMPM) for further detail. 7.6 Reporting of overpayments The QHSSP is to provide People and Culture Corporate, deputy Directors-General, and district CEOs with appropriate confidential reports of overpayment records in accordance with agreed time frames between Queensland Health and the QHSSP. Overpayments of a significant nature, or that may cause industrial dispute, are to be immediately escalated to People and Culture Corporate for their information and action as appropriate. 8 DEBT WRITE-OFF 8.1 Circumstances for debt write-off of overpayment All circumstances for write-off are to be fully investigated and appropriate recovery action taken with respect to wages overpayments. Overpayment debts cannot simply be reduced, waived, or written-off. Section of the FMPM states: Before approving a debt write-off, the authorised officer is to ensure: o proper steps have been made to investigate the raising and non-recovery of the debts o legal prosecution is inappropriate, unlikely to be successful, or is not cost effective o all reasonable steps have been made to recover the debt o the debt is reasonably considered to be non-recoverable o the circumstances surrounding the loss are examined fully to ensure that satisfactory controls are in place to limit similar occurrences in the future. 8.2 Write-off delegation Only in circumstances when the steps outlined in section 8.1 have been taken is an amount to be written off by Queensland Health. Accordingly, it is expected that writeoffs would occur in very rare instances and not in relation to a current Queensland Health employee. Financial delegations are required for approval of loss write-offs, as per of the FMPM. In health service districts, the district CEO has the delegation. Queensland Health will not write-off an overpayment debt on the grounds that an employee is experiencing financial hardship. 8.3 Adherence to policy Any write-off of wages overpayments is to occur in accordance with the Queensland Health FMPM. Overpayments Page 10 of 14

11 9 TAXATION 9.1 Taxation implications The overpayment of wages is not a fringe benefit at the time of payment, due to the exclusion of wages from the definition of a fringe benefit. However, if the employee does not repay the overpaid wages immediately and repays over a period of time, a loan fringe benefit arises at the time the repayment agreement is entered into (or in a situation when no explicit agreement exists, but repayments imply an agreement exists). This loan fringe benefit arises because of the interest advantage the employee receives from the overpaid wages. When repayment is not made immediately, fringe benefits tax (FBT) implications are to be considered. Employees are to either immediately repay any overpayments, or factor this issue into their salary packaging arrangements with regard to the $17,000 grossed up taxable value (GUTV) FBT exemption cap (if applicable) to avoid incurring FBT on salary sacrificing fringe benefits. It is also to be noted that the requirements of Public Sector Industrial and Employee Relations (PSIER) Circular C3/09 - Arrangements for salary packaging from 1 July 2009 (as amended from time to time), means that there is no option to avoid these FBT and salary sacrifice implications. This reflects the fact that the FBT exemption cap is a tax concession under the FBT legislation for employers, not employees. Employees have no entitlement to this tax concession. Given that FBT is an employer tax, Queensland Health has allowed salary sacrificing to occur only when employees meet any FBT incurred. Employees may therefore receive salary sacrificing fringe benefits to the level which takes them to $17,000 (GUTV) when added to any non-salary sacrifice fringe benefits (i.e. if they are eligible to access the FBT exemption cap), or otherwise be liable for the FBT. When the employee is not eligible to access the FBT exemption cap (e.g. Corporate Office, Population Health etc.), and/or is not participating in the salary sacrificing arrangements, any FBT incurred with respect to wages overpayment loan fringe benefit is to be borne by Queensland Health. Certain business areas of Queensland Health are designated as eligible for the public hospital FBT exemption cap in accordance with the Fringe Benefits Tax Assessment Act These business areas are listed and updated from time to time in the Queensland Health Salary Packaging booklet. A wages overpayment loan fringe benefit also becomes a Reportable Fringe Benefits Amount (FRBA) on the employee s payment summary for the relevant financial year. Employees may need to seek independent financial advice regarding their individual circumstances which may be affected. Overpayments Page 11 of 14

12 9.2 Calculation of taxable value of loan fringe benefit HR Policy C48 The taxable value (TV) of the loan fringe benefit is the notional amount of interest that would accrue by multiplying the daily balance of the wages overpayment outstanding by the statutory interest rate applicable for the FBT tax year. The statutory interest rate is determined by the Taxation Commissioner each FBT year (available on the Finance Branch site). The formula below is to be used to calculate the taxable value. TV = amount x interest rate x (days outstanding / 365 ) When periodic repayments occur, a number of calculations based on differing outstanding balances are necessary to arrive at the total loan fringe benefit value for a FBT year. When the TV of wages loan fringe benefits is less than $300 in an FBT year with respect to an employee, a minor fringe benefit exemption could be claimed where the conditions of section 58(p) of the FBT legislation are met. In the very rare instance when the write-off of wage overpayments occurs, and it occurs in accordance with the FMPM and this policy, no debt waiver fringe benefit will arise. If any write-off action is to be taken outside of the department s written policies, a debt waiver fringe benefit liability may arise (noting that section 58(p) minor fringe benefit exemption could apply). As write-off action outside of policy must not occur, the debt waiver situation should never become an issue within Queensland Health (i.e. so long as the FMPM and this policy are complied with). For further clarification of FBT implications and calculations for overpayments, please refer to the FBT business procedure on loan fringe benefits available on the Finance Branch intranet site. 10 DEFINITIONS Absence from work overpayment Finance Services Fringe benefit Gross repayment amount When an employee does not attend for work and is paid when they were not entitled to the payment, e.g. the employee has insufficient sick leave to cover the period of absence. The finance section of the QHSSP that provides financial, accounting and financial operations support. A benefit provided to an employee (including past, present and future employees) or an associate of an employee, in a form other than salary and wages, as defined in the Fringe Benefits Tax Assessment Act Repayment of an overpayment that has occurred in one or more previous financial years is determined based on the gross amount (which would include tax and superannuation, previously deducted amounts.) Tax and superannuation deductions cannot be recouped from previous financial years as payroll deductions have already been remitted and are unable to be recouped from the receiving entities. Overpayments Page 12 of 14

13 Gross substantive wage Gross wage Hardship Recommended repayment amount Net pay HR Policy C48 Base or standard fortnightly wage amount at the employee s substantive classification level prior to any pre-tax salary packaging deduction. This amount does not include overtime payments, shift penalties, higher duties and any other allowances. The standard Award-related wage and related entitlement payment calculated for the employee prior to any pre-tax salary packaging deductions. An application claiming hardship is to be supported by reasonable evidence that the recovery action proposed by the QHSSP would be unreasonable. Hardship is not be confused with inconvenience which is a requirement to repay a wage-related payment to which there was no entitlement and does not represent hardship. The recommended repayment requirement is based on the employee s gross wages or gross substantive wages payable for a pay period either in accordance with the Industrial Relations Act 1999 (for absence related overpayments) or an amount as agreed to by the employee. The employee is informed of the total repayment amount based on either a gross or a net amount depending on the financial year in which the overpayment occurred. The wage payment remaining after the deduction of PAYG tax and pre- and/or post-tax superannuation contributions. Any pre-tax salary package deductions and post-tax deductions (other than for superannuation contributions) are included in an overpayment calculation. Net pay may include deductions processed by QHSSP on behalf of the employee to one or more institutions. Net repayment amount Repayment of an overpayment occurring in the current financial year is determined based on the net amount. Tax and superannuation deductions can be recouped as payroll adjustments for the current financial year through the HR solution by the QHSSP. Overpayment Wage overpayment Wages See definitions for wage overpayment and absence from work overpayment, as applicable. A wage-related payment made to an employee which the employee has no entitlement to receive. The Industrial Relations Act 1999, schedule 5 defines wages as: an amount payable to an employee for: o o o o a salary or work performed, or to be performed by the employee a public holiday leave the employee is entitled to or termination of employment Overpayments Page 13 of 14

14 an amount payable from wages for the employee, with the employee s written consent, or a shortfall under section 220. Wages includes any allowances paid to the employee. 11 HISTORY Developed as a result of the HR policy consolidation project and in accordance with ATO rulings. Overpayments Page 14 of 14