How can an employer prevent the nonrepayment of overpaid wages that may result if a new employee quits shortly after receiving a signing bonus and other benefits?

Author: Alice Gilman

An employer should protect itself by providing for such situations in a company policy and/or handbook statement and by indicating the terms of a signing bonus and other benefits in a job candidate's job offer letter (i.e., that employees will have to pay back any bonuses received if they quit before working for the employer for a requisite period of time).

These documents should also indicate how the overpayment will be collected from the employee's final wages (i.e., through wage withholding). The employee should be required to acknowledge the terms of the job offer letter, and the handbook statement once hired.

The employer's payroll system should be set up with a code to handle this situation. Since current-year earnings cannot be adjusted to account for a previous year's repayment, the code does not affect the employee's earnings reported on the employee's Form W-2, Wage and Tax Statement, but it does allow the information to flow through to the general ledger for financial reporting purposes.