Special circumstances of correcting earnings payment data: examples

Report overpaid income as unjust enrichment

We recommend always reporting overpaid income as unjust enrichment. Offsetting, i.e. the advance pay method, is not recommended.

Treating an overpayment as advance pay is only permitted when the overpayment is recovered in full during the next payment of wages.

How to report unjust enrichment:

  • If the overpayment is noticed before the report is submitted, report the overpayment using the Unjust enrichment (359) income type.
  • If the overpayment is not noticed before the income has already been reported to the Incomes Register, you must correct the original report by submitting a replacement report and reporting the share of overpayment as unjust enrichment by adding an Unjust enrichment entry for the income type.

Example: The income earner has been paid EUR 3,500 in wages on 31 May 2019. In addition to the normal monthly pay (EUR 3,000), the wages include a bonus (EUR 480) and a phone benefit (EUR 20). After submitting the earnings payment report, the employer notices that no bonus should have been paid.

The payer corrects the submitted report and marks the EUR 480 overpayment as unjust enrichment. Please note that the contributions collected from the wages must also be corrected.

How to report a recovery:

Report recovery information once the income earner has paid back the overpayment. The recovered amount is not corrected in the original report; the recovery information is submitted in the report for the payment period during which the overpayment is paid back.

Report the following information on the recovery:

  • Income type
  • Recovery – Yes
  • Recovered amount
  • Recovery date
  • Withholding from the recovered amount (in net recovery situations)
  • Original pay period
  • Earnings period of the recovered income (voluntary complementary data)
  • Original wage payment date (voluntary complementary data)

Example: The income earner pays back a EUR 480 overpayment on 1 July 2019. EUR 120 was withheld from the overpayment (25%). The recovery is carried out as net recovery.  The income earner pays back an amount from which the withholding has been deducted, or EUR 360 (EUR 480 - EUR 120).

The payer reports the amount of recovered income, EUR 480, and the Recovery – Yes entry. The recovered amount is reported as a gross amount even if the payment was recovered as net recovery. If you wish, you can report the earnings period for the recovered amount.

As additional recovery details, report the recovery date (1 July 2019), the withholding from the recovered amount (EUR 120) and the original pay period (1 May 2019–31 May 2019). You can also report the original payment date (31 May 2019).

Correcting fringe benefits

If the income earner has access to a fringe benefit, its value is determined according to the decision issued by the Finnish Tax Administration on fringe benefits. If the value of a benefit received by the income earner is not specified in the decision, the fair value of the benefit is used as its value. A fringe benefit cannot be overpaid income, because the income earner either has access to the benefit or not. If the reported amount of the fringe benefit is too high or too low, this is always a reporting error.

Because a fringe benefit cannot be overpaid income, the Unjust enrichment entry is not used when fringe benefits are corrected.

If the reported amount of the fringe benefit is too high or too low (due to a typing error, for instance), the value of the fringe benefit must be corrected by submitting a replacement report.

If a fringe benefit received by the income earner was not reported at all, it must be reported by correcting the report for the month the benefit was left unreported.

Example (continues):

An employee gave up a phone benefit in April, but information on this did not reach the payroll department in time.

The income earner did not have access to the fringe benefit in May. If the mistake is noticed before the report for May is submitted, the fringe benefit is not reported to the Incomes Register at all. If the mistake is not noticed until the fringe benefit has already been reported to the Incomes Register, the data is corrected by submitting a replacement report with the fringe benefit removed.

Also correct the earnings-related pension and unemployment insurance contributions

When you are correcting the amount of income paid to an income earner, remember also to correct the employee's earnings-related pension and unemployment insurance contributions. Calculate the employee contributions from the corrected amount of wages.

Primarily correct the employee contributions in the same report in which you are reporting the unjust enrichment. The amount returned to the income earner is not reported when the extraneous withholding is credited to the income earner.

However, make the correction no later than in the report in which you are reporting the recovery. Employee contributions can be corrected in the recovery report only if the contributions are corrected during the same calendar year. If the correction is made later, the employee contributions must be corrected using an unjust enrichment report.

Please note that employee contributions are also collected from fringe benefits. If the euro amounts of the fringe benefits are changed, the change must be taken into consideration in the amounts of the employee's earnings-related pension and unemployment insurance contributions.

Correcting the earnings-related pension and unemployment insurance contributions collected from fringe benefits

If the amount of fringe benefit reported in the original report was too low, and the missing fringe benefit is added using a replacement report, more earnings-related pension and unemployment insurance contributions must be collected from the employee. The earnings-related pension and unemployment insurance contributions collected from the employee are reported to the Incomes Register in the report for the payment date on which they were collected from the employee. If a fringe benefit is added using a replacement report, the earnings-related pension and unemployment insurance contributions are not yet corrected at this stage; instead, they are reported in the report for the payment date on which they were actually collected from the income earner.

If a fringe benefit was incorrectly reported although the income earner had no access to it, submit a replacement report with the fringe benefit removed. At the same time, the employee's earnings-related pension and unemployment insurance contribution amounts decrease. The payer can credit the income earner for the extraneous amount collected by reducing the contributions of a later pay period, or pay back the extraneous amount collected to the income earner.

If the extraneous amounts of employee contributions collected are credited by reducing the contributions of the next pay period, the next pay period's report should contain the amount of employee contributions collected from that period's pay with the extraneous amount collected deducted.

If the extraneous amount collected is returned to the income earner, the payer reports the amount returned to the income earner to the Incomes Register as a negative value in a new report.

Example (continues): The employee's earnings-related pension insurance contribution (EUR 236.25) and unemployment insurance contribution (EUR 52.50) have been collected from the payment made (EUR 3,500).

The unjust enrichment of EUR 480 and the erroneous phone benefit of EUR 20 are deducted from the payment made.  The amount of employee contributions is calculated from EUR 3,000.

The earnings-related pension insurance contribution of EUR 32.40 and unemployment insurance contribution of EUR 7.20 collected from the payment that was unjust enrichment are deducted from the reported amounts already in the unjust enrichment report.

The corrected amounts of earnings-related pension insurance contribution, EUR 203.85 (EUR 236.25 - EUR 32.40), and unemployment insurance contribution, EUR 45.30 (EUR 52.50 - EUR 7.20), are reported in the unjust enrichment report or, at the latest, in the recovery report.

The earnings-related pension insurance contribution collected from the phone benefit, EUR 1.35, and the unemployment insurance contribution, EUR 0.30, are deducted from the amounts to be reported in the report for the next pay period, or, if the income earner is separately credited for the extraneous amount collected, a separate report of this crediting must be submitted to the Incomes Register.

How to handle withholding when correcting data

Tax withheld is always reported to the Incomes Register as the amount which was collected from the income earner.

In recovery situations, the tax withheld is corrected only when the recovery is carried out using net recovery.

  • If the recovery is carried out using net recovery, an amount from which the tax withheld has been deducted is collected from the income earner. Tax withheld from the recovered income is reported in the recovery report under 'Withholding from the recovered amount'.

The recovery can be carried out as net recovery if the income is paid back in the same year or at the beginning of the next year before the payment year's taxation has been completed. The Tax Administration provides instructions on the vero.fi website regarding the last date by which net recovery can be taken into account in the taxation of income earners. After this date given by the Tax Administration, the recovery will be carried out as gross recovery.

  • If net recovery cannot be carried out, the overpayment must be recovered as a gross amount. The recovered amount also includes the share of tax withheld. In such a case, the withholding from the recovered amount is not reported in the recovery report.

Read more about recovery.

Example (continues): EUR 875 (25%) of tax was withheld from a payment made (EUR 3,500). EUR 480 of the payment is overpayment and EUR 20 is erroneous phone benefit. The payer has corrected the report, reported the overpayment as unjust enrichment, and removed the phone benefit from the report. No changes are made to the amount of withholding (EUR 875).

If the payer has recovered the overpayment as a net amount, and the tax withheld from the recovered amount (EUR 120) has been separately reported to the Incomes Register, the tax withholding amount that is the payer's employer obligation for the period in question is reduced. Additionally, based on the information in question, the Tax Administration will also correspondingly reduce the amount of tax withholding previously accredited to the income earner.

Correcting 400 series income types

Items deducted from the income are reported to the Incomes Register in the report for the payment date on which the deductions were made from the income. If the deducted items need to be corrected, the corrections are usually made in the report for the next pay period. Corrections made to deducted items are reported to the Incomes Register when the payer has corrected the monetary amounts. Reimbursements collected for fringe benefits form an exception to this; they must be reported in the same report as the fringe benefit, even if the reimbursement is collected in advance or at a later date. Additionally, in the case of an overpayment, an employee's earnings-related pension and unemployment insurance contributions can be corrected in an unjust enrichment report.  

The Unjust enrichment entry is not specified for the deducted items.

Example: The payer has erroneously withheld a parking space fee of EUR 50 from the income earner's net wages and reported the item using the income type Other item deductible from net wage or salary (408). The extraneous amount collected was returned to the income earner during the next payment of wages after the error was detected. The payer can report the payment made using the income type Wages paid (406), and the amount of wage the person is left with is reported as an amount that is EUR 50 higher.

If, in the situation in question, a report was not yet submitted to the Incomes Register, the erroneously deducted item would not be reported to the Incomes Register.

Also correct the employer's separate report

When you are correcting an earnings payment report, and the correction affects the amount of the employer's health insurance contribution paid, remember also to correct the employer's separate report.

If you notice the error before submitting the employer's separate report, report the total amount of the employer's health insurance contribution in the correct amount already in the first report.

If you already submitted the employer's separate report before noticing the error, correct the total amount of the employer's health insurance contributions in the report for the original pay month.

Example: The payer submitted an employer's separate report for May, reporting EUR 26.95 as health insurance contribution paid based on EUR 3,500 of wages.

The employer corrected the earnings payment report and marked the EUR 480 overpayment as unjust enrichment and removed the erroneously reported phone benefit from the report. The amount of wages subject to health insurance contributions was changed to EUR 3,000.

The payer corrects the previously submitted employer's separate report and reports EUR 23.10 as the amount of the employer's health insurance contribution.