Overpayment Configuration in SAP HCM (US Payroll)
What is Overpayment?
Overpayment refers to a situation where an employee has been paid more than what they were entitled to — usually due to incorrect payroll processing, terminations not updated on time, retroactive changes, or incorrect master data.
Wage Types for Overpayment Management.
- Wage type /580 — Overpayment Balance
- Wage type /581 — Amount Recovered
- Wage type /582 — Prior-Year Overpayments (when applicable)
- Wage type /583 — Amount Forgiven (when applicable)
- Wage type /584 — Amount Overpaid
- Wage type /585 — Previous period overpaid balance
- Wage type /561 — Claim
- Wage type /563 — Claim from previous pay period.
Configuration Required for Overpayment Processing:
- NWCLM Switch:
i). This is main switch to enable the overpayment functionality.
ii). SM30 -> T77S0 -> Group : CCURE, Semantic Abbr. : NWCLM. - Other Switches are available in V_T511K (Constant Table):
a). AUTCL Switch:
i). This is to enable the auto clearing process using rules framework configuration as per States/ESG.
ii). When AUTCL is set to ‘1’ (ON) the system will use rules (configuration) provided that rules are not overridden at the employee level (IT 909).
iii). When AUTCL is set to ‘0’ (OFF) the system will not automatically clear. The only way of recovery would occur through IT909.
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b). FGVTR Switch:
i). This is to enable auto-forgiveness for terminated employees.
ii). When FGVTR is set ON, the system will forgive overpayment for terminated employees otherwise system will not forgive overpayment for terminated employees.
Rules for Overpayment Recovery:
Path : SAP Reference img. -> Payroll -> Payroll USA -> Overpayment Recovery -> Rules Framework
1. Minimum wages can be set for each state. If the state follows this rule, the system will make sure that, after recovering an overpayment, the employee still receives at least the minimum wage for that state.
2. Overpayment wage type priority: We need to set their priority so the system knows which ones to fix first.
3. Define threshold rule and forgiveness. A threshold rule helps decide how much money can be taken back if someone was overpaid. You first create the rule, then add the exact numbers later. You can also choose if the company or state will forgive (not take back) the extra money. The rule has a short name with four letters and is used to help figure out how much to recover.
Conditions for rule:
a. Critr allows two types of values: Fixed — a flat dollar amount, and WageT — a percentage of a wage type.
b. Wage Type = This is the wage type used to calculate how much money to recover.
c. Amount = The value entered here (amount or percentage) depends on what you selected in the Critr field.
d. Operations = “+” Plus Sign or “-“ Minus Sign to indicate whether the rules should be added/subtracted.
4. Define Rule Asg Criteria, Search Help and Priority — To set the search rules and the recovery priority for the threshold rule. The system allows two standard options: ESG and STATE. These must be added manually. If your company doesn’t use ESG or STATE, you’ll need to create your own rule and use the provided BAdi (a special tool to add custom logic).
5. Assign Threshold Rule to Criteria. In this step, you connect the rule (from step iv) to the criteria (in step v), like a specific state. You also choose if the state needs a minimum wage check and if employee consent is needed.
i). If minimum wage is checked, the system will use the minimum wage set in step i during recovery.
ii). If auto-clearing is ON, no employee consent is needed to recover the money.
iii). If auto-clearing is OFF, the system needs the employee’s consent and the amount to recover, both entered in info type 909.
Wage type Configuration:
1). Processing class 77 must be set for all earnings that can cause an overpayment.
2). Wage types with Processing Class 77 set to “1” must also be allowed in the IT 909 in T512Z.
