Sign on bonus

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Spritzer

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Hi If a sign on bonus received through payroll and the employee subsequently leaves during the period that the sign on bonus needs to be repaid , how can employer recoup the sign on bonus as it was taxed through payroll at higher rate.
There is no further pay due to employee to deduct it from.
 
Doesn't the contract of employment and/or employee handbook clarify what the process would be in such circumstances? If not then what was done in previous cases, if any?
 
Spritzer said:
Hi If a sign on bonus received through payroll and the employee subsequently leaves during the period that the sign on bonus needs to be repaid , how can employer recoup the sign on bonus as it was taxed through payroll at higher rate.
There is no further pay due to employee to deduct it from.
Click to expand...

Something like gross pay 5k per month for say 5 months plus one months sign on is gross: 30k paid.

Employee returns 5k. Employer runs an amended payroll reducing gross pay over the period to 25k. Revenue automatically adjusts tax credits, reflected in new employers payslip.
 
Are you asking what happens if the employee refuses to repay the sign on bonus?

Employee quits without notice on the day after he is paid.

Existing payroll:
Gross pay €30k
PAYE etc. €10k
Net pay: €20k

Change the payroll to
Gross pay €25k
PAYE etc €5k
Net pay €20k

Send him a good bye card.

Brendan
 
Revenue would view Brendan's solution as tax fraud.

Employee makes complaint to Revenue. Revenue investigate, Employer is audited and found not to be operating PAYE correctly, the fine is 4k per 'payslip', plus what ever else the audit funds.

Every payslip on ROS has a Pay Date, funds must be transferred (in account/date on cheque) on the Pay Date. Negative values are allowed (once not negative for the year), but the Pay Date is legally required to be the date the employee hands back money. Not figures an employer enters into system to extract money from Employee/Revenue.
 
Spritzer said:
Hi If a sign on bonus received through payroll and the employee subsequently leaves during the period that the sign on bonus needs to be repaid , how can employer recoup the sign on bonus as it was taxed through payroll at higher rate.
There is no further pay due to employee to deduct it from.
Click to expand...
Is an employer going to put themselves in this situation? i.e. giving a full sign on bonus up front before employee has completed X weeks / months in employment?

I've been fortunate to receive a sign on bonus and it was 33% after 1 month (in first pay packet), 33% after 6 months and 33% after 12 months. Once the employer paid it there was no sending it back.
 
All you can do is ask the employee to return the bonus, his tax affairs are his business. Realistically, he/she are going to tell you to get stuffed so you'll probably need to write it off unless you are prepared to sue him.
 
Brendan Burgess said:
I am surprised at that.

Whose is the bigger fraud - the employee in not returning the sign-on bonus or the employer in correcting the employee's salary?

Brendan
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It is not a fraud, it is a breach of contract. The ultimate resolution is to sue the employee for the money back. First steps would obviously be to ask for it back, if they refuse, send a solicitor's letter outlining what will happen if they don't return the money and then bring them to court. Whether it is worth the cost of bringing them to court depends on the size of the payment.
 
Peanuts20 said:
All you can do is ask the employee to return the bonus, his tax affairs are his business. Realistically, he/she are going to tell you to get stuffed so you'll probably need to write it off unless you are prepared to sue him.
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Yep, just like top-up maternity pay which is contingent on returning to work for a specified period of time. We've a 50% breach of contract rate on that but we look at the bigger picture; it's better to be rid of employees who are dishonest and have no personal ethical standards than having them working here in the longer term.
 
The contract stated the sign on bonus (which was paid up front in total with first pay) is repayable if employee leaves within 1 year on pro-rata basis. The employee left after 3 months and therefore is due to repay 3/4. However the employee received net bonus after tax so only 52-54% of bonus and therefore does not want to repay the gross bonus. Unclear how this will work from payroll , can the employer amend the payroll and then request the difference between net pay received and net pay per amended payroll?
Thanks for your views.
 
Spritzer said:
Unclear how this will work from payroll , can the employer amend the payroll and then request the difference between net pay received and net pay per amended payroll?
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Did you ask the employer if they can facilitate the request?

As the tax situation is individual, and there is now no relationship with the employer, it would seem very messy to take the approach you suggest.
 
Just think it's unfair to employee to pay back gross bonus when they only received net amount. Or is there a method of claiming the tax back?
 
Spritzer said:
However the employee received net bonus after tax so only 52-54% of bonus and therefore does not want to repay the gross bonus.
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Did you really expect that anyone would repay more than they were paid?
 
Spritzer said:
Just think it's unfair to employee to pay back gross bonus when they only received net amount. Or is there a method of claiming the tax back?
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It's likely that Revenue will adjust the tax credits for the new employment fairly rapidly, there is live notification of payrolls now. The situation could have been avoided by notifying the employer prior to the final payroll run and the final salary could have been adjusted.

To be fair to the employer, they took the risk by agreeing to pay upfront and have lost out. Increased admin and recruitment costs on their side, with the additional risk that they might have hired a low character individual who would not return the money owed.
 
Spritzer said:
The contract stated the sign on bonus (which was paid up front in total with first pay) is repayable if employee leaves within 1 year on pro-rata basis. The employee left after 3 months and therefore is due to repay 3/4. However the employee received net bonus after tax so only 52-54% of bonus and therefore does not want to repay the gross bonus. Unclear how this will work from payroll , can the employer amend the payroll and then request the difference between net pay received and net pay per amended payroll?
Thanks for your views.
Click to expand...
The repayment is clearly going to have to be reflected in payroll. Your payroll provider may be able to advise how this can be done, otherwise you'll have to seek clarification from this from Revenue via MyEnquiries.
 
Spritzer said:
The contract stated the sign on bonus (which was paid up front in total with first pay) is repayable if employee leaves within 1 year on pro-rata basis. The employee left after 3 months and therefore is due to repay 3/4. However the employee received net bonus after tax so only 52-54% of bonus and therefore does not want to repay the gross bonus. Unclear how this will work from payroll , can the employer amend the payroll and then request the difference between net pay received and net pay per amended payroll?
Thanks for your views.
Click to expand...
Of course they won't. And nor should they have to repay more than they were paid, that would mean they are paying a fine for leaving a job. I'm sure there is no issue in doing a payroll adjust to reflect the money being refunded. I imagine that it is quite easy to do and any payroll software can do it. For example, what if someone is overpaid overtime rates by accident? I'm sure these adjustments happen all the time.
 
There's a revenue guide to what to do. It's explained in section 5 here. The employee repays the net amount and the employer does a payroll entry with negative pay and negative tax to balance everything.

BTW Brendan's solution further up would result in revenue footing the bill for the employee's undue bonus which, apart from that not making sense, would be flagged by the paye system as the gross pay and tax figures wouldn't tally with the employee's tax credits.
 
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