1. Your employer will need to add the excess to boxes 1, 3, and 5. Perhaps they have forgotten that they removed the HSA contribution from all three boxes.
2. OK
3. OK
The problem with all this is that your paperwork will not match that of the HSA custodian. The employer is pretending that they did not make that contribution when they did. You will be removing excess contributions, but your tax return will not show that you had any excess contributions.
OK, the way to do this correctly is for you to ask your HSA custodian if you can declare this to be a contribution in error, and that you would like to correct this. The HSA custodian will likely say that you did not make the contribution but your employer did. All you can reply is that the employer won't retrieve the contribution and they are changing the paperwork to pretend like they never made it, so if the HSA custodian won't let your retrieve the contribution, that you will end up owing income tax on it, not have the money anyway, and your 8889 will be hopelessly fouled up.
May I quote you from above? "So I end up doing all the works for silly mistake by the employer. " Maybe you can have the employer call the HSA custodian and ask them to honor your request.
OK, the HSA custodian does not have to honor your request, so be very nice to them and even grovel at their feet if need be. If the HSA custodian will return the contribution, they will send you a check for the amount. If they will do this, then the corrected W-2 will be correct, with no code W, you won't have any excess contributions to report, and you won't care if your employer takes the code W amount out of your paychecks because you already have the money.
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