Office of Origin:                               Finance

Responsibility:                                 Chief Financial Officer

Original Date Adopted:                 5-19-26         

Dates Reviewed:                              5-19-26

Last Date Board Approved:          5-19-26

Lake Michigan College (College) is committed to accurate and timely processing of payroll and related transactions. When an overpayment, underpayment, or payroll processing error occurs, the College will address the error promptly, consistently, and in compliance with applicable laws.

This policy applies to all employees, including full-time, part-time, adjunct faculty, temporary, and students. It applies to all forms of compensation processed through payroll, including salary, wages, stipends, supplemental contracts, authorized deductions and deductions remitted to third parties. This policy does not limit the rights or obligations of the College or its employees under applicable law, collective bargaining agreements, or plan documents.

Definitions

• Overpayment: Compensation paid in excess of that due and/or insufficient payroll deductions.
• Underpayment: Compensation paid in an amount less than that due and/or excessive payroll deductions.
• Payroll Processing Error: An error in payroll processing, such as miscalculation, incorrect withholding, or failure to properly or timely remit authorized payroll deductions.
• Misrepresentation or Concealment: An error resulting from employee misrepresentations, failure to disclose material information, or knowing retention of funds not owed.

Employee Responsibilities
Employees are responsible for reviewing payroll and benefit documentation for accuracy, including pay statements each pay period, annual benefit confirmations, account statements, and supplemental contracts. Employees should notify Finance in writing as soon as possible if a discrepancy is noted. Failure to report a known overpayment may be considered when establishing repayment terms.

College Responsibilities
Upon identification of an issue, the College will acknowledge it within 3 business days, investigate within 10 business days, and communicate findings and corrective action in writing within 5 business days thereafter.

Correction of Underpayments and Payroll Processing Errors
If an employee has been underpaid, an excessive deduction has occurred, or an authorized payroll deduction was not properly withheld or remitted to a third-party, the College will correct the error in the next regular payroll cycle whenever practicable, or as soon as administratively feasible.

If the underpayment exceeds 10% of the employee’s regular gross pay for a pay period, the College may issue a special payroll payment.

Corrective actions may also include adjustment of benefit contributions, remittance of missed payments, and updated tax and benefit plan reporting. Where a payroll processing error results in documented financial consequences to the employee, the College will take reasonable steps to address the direct financial impact attributable to the error.

Correction and Recovery of Overpayments
The College will ordinarily pursue recovery of overpayments identified within 24 months from the date of occurrence. Overpayments under $250 will be waived, in consideration of administrative efficiency and cost-benefit. Overpayments of $250 or more may be waived only with written approval of the Chief Financial Officer (CFO), based on documented administrative burden, cost-benefit, or equity considerations. Overpayments resulting from misrepresentation, concealment, or fraud are not eligible for waiver, regardless of time of occurrence or amount.

The College will work with an employee to establish reasonable repayment terms that consider College fiduciary responsibilities, employee circumstances, overpayment amount, length of time over which it occurred, and administrative practicalities. Generally, repayment must be completed within the same calendar year in which the overpayment is identified. If repayment must extend beyond the calendar year, written approval from the CFO is required.

Overpayment recoveries through payroll deduction must comply with wage payment laws and require a written agreement signed by the employee. If payroll deduction is not authorized, the employee must identify an alternative repayment method.

If the outstanding overpayment balance is not settled prior to employee separation from employment, the outstanding overpayment balance will be deducted from final pay if allowable by law. If the final paycheck is insufficient to satisfy the balance, the College may invoice the former employee for the remaining amount.

Misrepresentation or Concealment
If an overpayment or payroll processing error results from employee misrepresentation, failure to disclose material information, or knowing retention of funds, the College reserves the right to pursue recovery consistent with applicable law and to address the matter under its disciplinary policies.

References:        Fair Labor Standards Act (FLSA)