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CRA update on overpayments due to clerical errors or when employee didn’t perform duties

Instructions on how to correct salary overpayment caused by administrative error or when employee did not perform duties have recently been published on The Canada Revenue Agency’s website.

Several issues have been highlighted:

1. If an employee needs to repay employer for example for a vacation which he took in advance before accruing it and then left the company, this
should be considered as repayment of salary and wages

2. If the above situation happens, employers cannot adjust the employee’s T4 slip or the payroll records to reduce the total employment income or source deductions by the amount of the repayment. The employer’s share of CPP contributions and EI premiums will not be refunded.

3. The information on any repayment should be included in a letter issued by a payroll department confirming the tax year when the overpayment was included in the employee’s income as well as the date, the reason, and the amount of repayment received.

4. Clerical or administrative errors -  an overpayment amount due to an administration or clerical mistake should not be considered to be salary, wages, or an advance in the year the employee received it. If the error will be discovered after issuing a T4 slip, the employer must issue an amended T4 slip for that year to exclude this amount.

For more information on overpayments rules published by CRA go to their website

In order to avoid overpayments and any other clerical and administrative mistakes when preparing payroll, solutions such as time and attendance could be taken under consideration.

The system uses attendance data collected through clocking in devices such as biometric readers, swipe cards, proximity cards, mobile phones application and  automatically transfers it to a payroll application reducing human error factor and duplication of the data to a minimum.

Mistakes made when calculating vacation entitlements can also be avoided through automatic vacation request/approval software. It saves time and provides employees with an up-to-date and accurate data on their allowances and helps them book it without having to speak to their manager.



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