Special circumstances of correcting earnings payment data: examples

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, the original report must be corrected by submitting a replacement report and reporting the share of the overpayment as an unjust enrichment by adding an Unjust enrichment entry for the income type. In this case, no separate ‘Unjust enrichment’ income type is used.

Example 1:

A person has been paid EUR 2,200 in wages in January, with 25% (EUR 550) tax withheld. Employee contributions have also been collected in the normal manner. The payer has submitted an earnings payment report to the Incomes Register.

201 Time-rate pay 2200.00

402 Withholding tax 550.00

413 Employee’s earnings-related pension insurance contribution 157.30

414 Employee’s unemployment insurance contribution 30.80

Later, the payer notices that it has overpaid EUR 200 in time-rate pay. The payer carries out an additional run in the payroll system, which results in a EUR 200 receivable from the employee in question as a negative amount.

As negative amounts cannot be reported to the Incomes Register, the payer must, after noticing the overpayment, report the overpayment (EUR 200) as an unjust enrichment.

The payer corrects the earnings payment report submitted for January by submitting a replacement report.

The original payment date is marked as the payment date on the replacement report. The unjust enrichment is reported by using the previously reported income type and by adding a separate ‘Unjust enrichment’ entry to the income type. The amount of pay is corrected.

201 Time-rate pay 2000.00

201 Time-rate pay 200.00

  • Unjust enrichment: Yes

402 Withholding tax 550.00

Even though the overpayment is corrected as an unjust enrichment, the income earner’s taxable income will remain at EUR 2,200, and the withholding tax will remain at EUR 550 in accordance with the actual situation.

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. The reporting of an unjust enrichment has no impact on the amount of withholding carried out.

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

An unjust enrichment affects the obligations to pay social insurance contributions

Earnings-related pension and accident insurance providers adjust the amount of payments invoiced from the employer automatically on the basis of a replacement report. However, the payer must correct the employee’s share of the earnings-related pension and unemployment insurance contributions in the Incomes Register.

In addition, the payer must correct the amount of health insurance contributions voluntarily on the employer’s separate report to correspond to the correct amount of wages.

Correct the employee’s earnings-related pension and unemployment insurance contributions

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

You can return excessively charged employee contributions to the income earner or on the next payday you can withhold a lower amount of employee contributions but report them as if they were charged normally from income.

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

However, you should correct employee contributions no later than on the report on which you are reporting the recovery. Employee contributions can only be corrected on this report if the overpayment and recovery take place during the same calendar year.

Example 1 (continued):

The payer corrects the employee’s earnings-related pension and unemployment insurance contributions on the same report on which they report an unjust enrichment.

201 Time-rate pay 2000.00

201 Time-rate pay 200.00

  • Unjust enrichment: Yes

402 Withholding tax 550.00

413 Employee’s earnings-related pension insurance contribution 143.00

414 Employee’s unemployment insurance contribution 28.00

Because the wages subject to social insurance contributions decrease to EUR 2,000 in this example, the payer can reduce the employee’s earnings-related pension and unemployment insurance contributions to correspond to this amount. 

On the basis of the report submitted to the Incomes Register, social insurance providers consider EUR 2,000 as wages subject to social insurance contributions (in this example).

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 on the first report (which is the only report in this case).

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

Example 1 (continued):

The payer submitted an employer’s separate report for May, reporting EUR 33.66 as the health insurance contribution paid based on wages of EUR 2,200 .

The payer has corrected the earnings payment report and marked an overpayment of EUR 200 as an unjust enrichment. The amount of wages subject to health insurance contributions was changed to EUR 2,000.

The payer corrects the previously submitted employer’s separate report by reporting EUR 30.60 as the amount of the employer’s health insurance contribution.

How to report a recovery:

Report a recovery once the income earner has paid back the overpayment. The recovered amount is not corrected on the original report; instead, the recovery is submitted on a report for the pay period during which the income earner paid back the overpayment.

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 payday (voluntary complementary data)

An overpayment can be recovered in three different ways: a net recovery or a gross recovery, or by processing the overpayment as advance pay (offsetting from wages). The processing of an overpayment as advance pay is not recommended. However, if this is done, information about the recovery is not reported to the Incomes Register.

Example 1 (continued), option A: The payer recovers the overpayment by using the net recovery method

The employer agrees with the income earner that it will recover the overpayment of EUR 200 paid in January in connection with the February wage payment. The overpayment is recovered from wages for February using the net recovery method. The income earner’s normal wages for February are EUR 2,000.

Between the two wage payments, the income earner has received a new tax card, and their withholding rate is now 20%.

201 Time-rate pay 2000.00 (withholding 20%)

201 Time-rate pay 200.00 (recovered amount, gross)

  • Recovery: Yes

402 Withholding tax 400.00 (from EUR 2,000)

413 Employee’s earnings-related pension insurance contribution 143.00 (from EUR 2,000)

414 Employee’s unemployment insurance contribution 28.00 (from EUR 2,000)

Additional recovery details:

Repayment date: February payday

Withholding from the recovered amount: EUR 50 (25% from EUR 200, withholding in January)

Original pay period: 1–31 January 20XX

Original wage payment date: January wage payment date

The ‘Withholding from the recovered amount’ data affects the employer’s withholding obligation. On the basis of this data, the withholding obligation for the January tax period decreases by EUR 50 (in this example). Correspondingly, the income earner’s income for the tax year in question decreases by EUR 200 and withholdings accredited to the income earner by EUR 50. Recovery data has no impact on the obligation to pay social insurance contributions. In the example case, the social insurance contributions are determined on the basis of EUR 2,000.

In the example, the income earner’s net income after taxes and employee contributions totals EUR 1,432, which the recovery is based on.

(Gross amount EUR 2,000 - withholding EUR 400 (20%) - EUR 143 - EUR 28 = EUR 1,429.)

The January overpayment (net amount of EUR 150) is deducted from the income earner’s net wages.

(Gross amount EUR 200 - tax EUR 50 (25%) = EUR 150.)

The income earner receives EUR 1,429 - EUR 150 = EUR 1,279.

Example 1 (continued), option B: The payer recovers the overpayment by using the gross recovery method

The employer agrees with the income earner that it will recover the overpayment of EUR 200 paid in January in connection with the February wage payment. The overpayment is recovered from the wages for February using the gross recovery method. The income earner’s normal wages for February are EUR 2,000.

Between the two wage payments, the income earner has received a new tax card, and their withholding rate is now 20%.

201 Time-rate pay 2000.00 (withholding 20%)

201 Time-rate pay 200.00 (recovered amount, gross)

  • Recovery: Yes

402 Withholding tax 400.00 (from EUR 2,000)

413 Employee’s earnings-related pension insurance contribution 143.00 (from EUR 2,000)

414 Employee’s unemployment insurance contribution 28.00 (from EUR 2,000)

Additional recovery details:

Repayment date: February payday

Original pay period: 1–31 January 20XX

Original wage payment date: January payday

In the example, the income earner’s net income after taxes and employee contributions totals EUR EUR 1,429, on which the recovery is based.

(Gross amount EUR 2,000 - withholding EUR 400 (20%) - EUR 143 - EUR 28 = EUR 1,429.)

The January overpayment (gross amount of EUR 200) is deducted from the income earner’s net wages. The income earner receives EUR 1,429 - EUR 200 = EUR 1,229.

The employer’s withholding obligation does not decrease for January. A gross income of EUR 200 will be removed from the income earner’s taxation, while the amount of withholding will remain the same.

In terms of reporting to the Incomes Register, the difference between gross and net recovery is that, in gross recovery, the ‘Withholding from the recovered amount’ data is not reported.

Example 1 (continued), option C: Offsetting from wages, or processing the overpayment as advance pay when paying wages after noticing an error

The employer agrees with the income earner that it will recover the overpayment of EUR 200 paid in January by offsetting the amount from gross wages paid in February. The income earner would normally be paid gross wages of EUR 2,000 in February, but the payer deducts the overpayment and only pays gross wages of EUR 1,800 to the income earner. The withholding and employee contributions are carried out from this sum.

201 Time-rate pay 1800.00 (EUR 2,000 - EUR 200 = EUR 1,800)

402 Withholding tax 360.00

413 Employee’s earnings-related pension insurance contribution 128.70 (from EUR 1,800)

414 Employee’s unemployment insurance contribution 25.20 (from EUR 1,800)

In the example, the income earner’s net income after taxes and employee contributions totals EUR 1,286.10.

(Gross amount EUR 1,800 - withholding EUR 360 (20%) - EUR 128.70 - EUR 25.20 = EUR 1,286.10.)

Please note that, if the overpayment is recovered by processing it as advance pay, no data on an unjust enrichment or recovery is reported to the Incomes Register.

The employer’s obligations for the January tax period will not change. The income earner’s taxable income for February is EUR 1,800. The income earner’s wages subject to health insurance contributions are EUR 1,800.

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. Therefore, the ‘Unjust enrichment’ data is not used when correcting fringe benefits. If the reported amount of the fringe benefit is too high or too low, this is always a reporting error.

If the reported amount of the fringe benefit is too high or too low (due to a typing error, for example), the value of the benefit is corrected by submitting a replacement report. If a fringe benefit given to the income earner has not been reported at all, it is reported by correcting the report for the month over which the benefit was left unreported.

Please note that employee contributions are also collected from fringe benefits. If the value of a fringe benefit reported to the Incomes Register is corrected, the change must be taken into account in the amount of the employee’s earnings-related pension and unemployment insurance contributions.

Example 2:

The income earner has been paid EUR 3,020 in gross wages in February. In addition to the monthly pay (EUR 3,000), the wages include a telephone benefit of EUR 20. 

The income earner gave up their telephone benefit at the end of January, but this information did not reach the payroll department in time. If the error is noticed before the report for February is submitted, the fringe benefit is not reported to the Incomes Register at all. If the error is noticed after 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.

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

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

If the fringe benefit was reported, although the income earner had no access to it, a replacement report with the fringe benefit removed is submitted. At the same time, the correct amount of the employee’s earnings-related pension and unemployment insurance contributions decreases. The payer can credit the income earner for the extraneous employee contributions collected by reducing the contributions of a later pay period, or alternatively return the extraneous amount collected to the income earner.

If the extraneous employee contributions are credited by reducing the contributions of the next pay period, the next pay period’s report should include the amount of employee contributions collected from that period’s pay with the extraneous amount 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 on a new report.

Example 2 (continued):

The income earner’s share of the earnings-related pension insurance contribution (EUR 215.93) and unemployment insurance contribution (EUR 42.28) have been withheld from a gross payment made to the income earner (EUR 3,020).

 Data on a telephone benefit is corrected by submitting a replacement report with the benefit removed. The amount of the employee’s earnings-related pension and unemployment insurance contributions is not yet corrected on the replacement report.

The earnings-related pension insurance contribution of EUR 1.43 (7.15%) and the unemployment insurance contribution of EUR 0.28 (1.4%) collected from the telephone benefit of EUR 20 are deducted from the amounts reported on the next pay period’s report. If the extraneous withholding has alternatively been credited to the income earner separately, a separate report on the credited amount is submitted to the Incomes Register.

Correcting 400 series income types

Items deducted from income are reported to the Incomes Register on the report for the payment date on which the deductions were made from the income. If the deducted items need to be corrected, the corrected data is usually submitted on 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. Exceptions to this include reimbursements collected from fringe benefits that must be reported on the same report as the fringe benefit, even if the reimbursement was 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 by reporting an unjust enrichment. 

If an item deducted from income, which has no impact on the amount of taxable income or income subject to social insurance contributions, is corrected, the correction can be made on the original report or the next pay period’s report. An extraneous parking space fee is an example of such an item to be deducted.

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

Example 3:

The payer has erroneously withheld a parking space fee of EUR 50 from the income earner’s net wages of EUR 2,000 and reported the withheld item using the ‘Other item deductible from net wage or salary’ (408) income type. 

The extraneous amount collected was returned to the income earner during the next payment of wages after the error was detected. The extraneous amount can be corrected in the Incomes Register in two alternative ways:

  1. The payer can correct the original report and remove the erroneously withheld item reported using income type 408. The item can be removed by setting the reported amount to zero or by removing the income type altogether.
  2. The payer can report the credited amount on the next pay period’s report: in this case, the payer reports the total amount of wages received by the income earner of EUR 2,050 using income type 406 (Wages to be paid).

If, in the situation described in this example, no report was yet submitted to the Incomes Register, the erroneously deducted item would not be reported to the Incomes Register at all.