What are excess employer benefits?
Excess employer benefits are when an employee has received an overpayment of leave pay during their scheduled leave. Employees cannot receive more than 100% of their wages, which means they unfortunately would need to repay their employer for the excess benefits received.
Why do employees receive excess benefits?
There are a few possible reasons why an employee might have received excess employer benefits:
Employees changing their leave dates after claims have already been filed.
Actual payments from third parties (state & insurance) differing from Cocoon's projections.
Timing of employees receiving their third party benefits was late into their leave where Cocoon no longer can adjust leave pay.
Employees on an intermittent leave logged their leave time late in Cocoon.
Cocoon works to prevent or minimize this scenario as much as possible during the course of the employee's leave via the estimation method. In the rare case Cocoon is not able to apply corrections to the employee's leave pay before the employee returns to work, the remaining balance is then surfaced to the Cocoon dashboard.
What happens when employees receive excess benefits?
When Cocoon identifies a balance that will impact the employee returning to work, the below will happen:
1. Cocoon will notify Pay Admins via the Cocoon dashboard if there are any excess employer benefits as the remaining payroll calculation is finalized. This notification is generated before the employee returns from leave after the final payroll is published to the Cocoon dashboard.
2. Cocoon will also send a notification email to the employee of their excess employer benefits a week after they’ve returned to work.
3. The Pay Admin will review the balance in Cocoon and determine next steps to work with their employee returning from leave. Employers typically have their own repayment policy to address overpayments created with their legal team to ensure all wage laws are adhered to for any paycheck discrepancies.
4. Once the Pay Admin works with their employee to create a plan to recover the overpaid funds, Pay Admins can indicate the amount recovered each pay period in the Cocoon dashboard, which will dynamically update the balance owed on the employee's pay tracker.
How should an employer coordinate repayment?
The Cocoon payroll product will only reduce employee leave pay wages during the course of an employee's leave. In other words, Cocoon's pay file will not reduce regular wages. As a result, excess employer benefits are surfaced to the employer dashboard instead of the payroll file once the employee has returned to work.
While Cocoon can surface repayment amounts, it is the responsibility of an employer to coordinate repayment directly with employees due to the employee now receiving regular work wages. Please consult your counsel with regards to appropriately coordinating with your employee of overpaid leave pay.
There may be circumstances, including recoupment of overpayment across calendar years, that could have tax implications including filing W2C, W3C and 941X. Your tax professional can provide more tailored guidance regarding your specific situation. Cocoon cannot provide tax, accounting or legal advice.
Once you’ve worked with an employee to recover these funds, please indicate the amount recovered in Cocoon to ensure that your employee’s pay is appropriately reflected.
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