Ex employer demand for wrong salary calculation post year of full and final settlement

I have a situation at hand related to FnF process completed by my ex-employer. After nearly a year of FnF completion, no dues exchange and experience letter release, I get a call from HR that during one of the months of employment, I had been given excess variable pay along with my salary, which needs to be refunded now. Is the employer liable to recover for such a mistake from me after a year, and that too once full and final settlement has been released after multiple checks? There are tax implications too which make the issue a bit more complex. Please guide.

Dear Varun,

You have written about the notice that you have received from your ex-employer. It is based on incorrect calculations, and their contention is that you have been disbursed an excess amount. You have questioned the validity of the refund claim as it has been raised after a year.

Possibly, the error in calculation might have been identified during the yearly audit, which led to the delay. Nevertheless, the question arises about the validity of the claim. Have you checked their previous calculation and the subsequent one? What is the discrepancy, and why has it emerged?

If their claim is valid, then I recommend you refund the amount. If you have included that income in your tax filing and returned it accordingly, deduct the proportional tax component and refund the remaining amount.

Thanks,

Dinesh Divekar

Thank you for the response, @Dinesh. I have reviewed the credited amount. I am questioning the validity of the claim based on the multiple checks conducted and the completion of documentary formalities for the release process. My concern is whether an employer can revoke an employee's Full and Final settlement after granting clearance, reverse the calculated amount, and consequently invalidate the no-dues clearance that was issued.

Additionally, there are other deductions made upon reevaluation for which no descriptions have been provided.

Dear Varun,

Whether the employer conducts multi-level checks of the FnF settlement form or not, if you had noticed the payment of the excess amount, then honestly, you could have brought it to the employer's attention and followed the procedure to refund the excess amount. If you had taken this action, you would not have received this notice.

If you had any doubts about the deductions of any kind, you could have raised the query immediately upon receiving the FnF amount. You may still do so now.

Even now, you have the option to refund the amount. However, ensure that you ask the HR Head to send the letter on the company's letterhead, signed by the competent authority.

I strongly recommend that you refund the excess amount because you may need the previous employer for background verification (BGV) in the future. When you leave your current job and join a new one, the future employer might conduct a BGV from the last two employers, with one being your immediate past employer. Failure to refund the amount could lead to internal blacklisting and create issues during the BGV process. Therefore, I suggest taking the necessary steps.

Thanks,

Dinesh Divekar

I agree with what you are saying, but it's not something that was intentional. Otherwise, I would not be concerned about the way forward. I also came to know about this issue when I received information from the HR of my ex-employer after a year. I am surprised because all official records showcase the same, so I wouldn't doubt the payment being released by the company at any point.

The idea is not to hold the company's funds that are not due to me but to be concerned about such queries. My logic is that tomorrow the company may call after another six months, stating that the salary computation was wrong, and hence another refund is due. I am not worried because I have not kept the money intentionally; rather, the process as laid out has a validity, and it can't be open for corrections infinitely. Therefore, I am in need of guidance.

Dear Varun,

If you feel that after a year the refund claim is untenable, then you can very well write to the previous employer stating that you have been issued a "No Due Certificate". Therefore, after a year, the refund claim cannot be entertained.

However, there is a downside to holding on to this position. One issue is that your ex-company may send a notice to you with a CC to your current employer. The tactic of copying the letter to the current employer may be used to bring mental pressure on you to refund the excess payment. If your ex-employer becomes aware of this case, they may start asking unnecessary questions, and you may be cast in an unflattering light.

Alternatively, your ex-company may send you the lawyer's notice, and a copy of this notice may also be sent to the current employer. However, this possibility will only arise if the amount involved is significant enough to warrant a lawyer's notice.

Lastly, be aware, gentleman! Life is too uncertain. There are always ups and downs. Who knows, you may need the help of your ex-company for some other reason. If you take a tough stand, the doors to receiving help may be permanently shut. In contrast, if you pay the amount, the door will be left ajar for a long time.

Therefore, the choice is yours!

Thanks,

Dinesh Divekar

Hi,

If your previous employer had written and explained to you about the wrong calculations done in your F&F, maybe it should be taken as an admission on their part of the mistake. As rightly pointed out, there has to be an end to the issue, which is nothing but repayment through a cheque in the name of the company, less whatever was deducted towards tax on that component. Do not get stressed about these issues as it is not a recurring problem and can be sorted out amicably. Be generous towards the mistake and its admission.

Thanks and Regards

Dear Varun,

There are chances of calculation mistakes during the payroll process. However, it is always advisable that the mistake should be corrected as soon as it is brought to notice. It is a bit late for your ex-employer to inform you, but take it as an opportunity to correct your mistake and be on good terms with them. The industry is small, and perhaps they can be of help in the future.

Dear Varun,

You were well aware that you had been paid excess variable through one of the months during your employment, and you had not shown courtesy to refund the amount to your ex-employer nor brought it to the notice of the Payroll/HR department.

Mr. Dinesh Divekar rightly pointed out that this might be an auditor's remark during the audit and advised the concerned department for recovery.

You mentioned that after multiple checks and releasing your full and final settlement, how can the company ask for a refund? The reason is the audit must have taken place after your full and final settlement; otherwise, they would have recovered it from your full and final settlement without notifying you.

Now the choice is yours whether to refund the amount to the company or not. But make this decision only if you have not made any mistakes in your life.

Regards,

Suresh

Dear Varun,

Nobody is infallible. I think this excess payment pertains to a particular month due to the wrong calculation of a variable part of the salary. Had you still been in service, it would have been easily recovered from your salary subsequently. Just because you left the organization, they are asking you now to refund the same. If the calculation is correct in all respects, then the demand for recovery would also be correct despite the full quit receipt obtained from you on your formal exit. Suppose some benefit like gratuity or arrears of salary consequent on retrospective pay revision becomes due, would you accept the refusal of the ex-employer based on the contention of the full and final settlement? Any genuine omissions or mistakes in calculation in the full and final settlement can be rectified later. Besides, as the recovery pertains to a one-time excess payment due to wrong calculation only, your contention based on full and final settlement seems to be hyper-technical.

One more important and practical point: if it cannot be recovered from you, probably the amount would be recovered from the poor guy who made the mistake. Will it be fair on your part? Think it over, please.