In the event that the employee refuses to repay the sum owed, it is open to the employer to take legal action against them. By the time the Council realised its mistake the teacher had spent most of the money. In these circumstances, the employer was only entitled to recover the excess of the loan in the civil courts. By way of example, where an employee has failed to pay off a travel season ticket prior to handing in their notice but had previously signed an agreement to say they would pay back any shortfall, the employer would be well within their rights to seek recovery of any outstanding amount. Having identified an overpayment, most employers will often act promptly in seeking to recover the amount outstanding, in some cases even opting to deduct the full amount from the employee’s next pay packet. Where an employer has made an accidental overpayment of wages, the statutory position is that the employer can recover this by deducting the overpayment from future wages or salary. However, recovering the overpayment over time, so as not to cause financial distress, is key. DavidsonMorris Ltd t/a DavidsonMorris Solicitors is a company Registered in England & Wales No. Third-Party cookies are set by our partners and help us to improve your experience of the website. ACAS provide advice and arrange settlements between employers and workers, they can be contacted on 0300 123 1100 (lines are open from 8am-8pm). You have the right to deduct money from an employee’s pay if you recently made a simple overpayment. Further, an employer does not need strictly speaking need the employee’s permission to recover the overpayment, where the money can be directly deducted from any wages. Use this letter template to notify a former employee that you overpaid their wages by a certain amount or over a period of time. The deduction can be made either by a lump sum or instalments and can be taken directly from the employee’s … This rule will also apply regardless of whether or not the employee was aware of any error or has spent the extra money. Some cookies are essential, whilst others help us improve your experience by providing insights into how the site is being used. Notify the employee of the fact that an overpayment has been made, providing them with an explanation as to how this has arisen, together with a breakdown, including the dates and amounts. These cookies will be stored in your browser only with your consent. In theory, the employer is not even required to inform an employee that these deductions will be made. Moreover, an employee who deliberately allows overpayments to build up is potentially exposing themselves to allegations of dishonesty. Debenhams - what does this mean for the employees? In other words, the employer is legally entitled to recover any salary overpayment from the employee. Overpayment of wages after leaving employment If an employee has left when you discover the overpayments, this complicates proceedings, but it doesn’t affect your rights when attempting to reclaim the amount. The employer should act quickly on discovering an overpayment to an employee who has since left the organisation; it may be possible to recover the overpayment from the employee's final wages. The recovery of an overpayment of wages by offsetting the amount against future salary or wages, subject to the authorisation by the employee, will be regarded as a reasonable deduction for the benefit of the employer, particularly if the overpayment was simply due to an error or mistake. The process should remain the same. Any failure on the part of the employer to act fairly or reasonably in these circumstances, without having regard to the potential financial hardship that immediate repayment could cause the employee, could be construed as a fundamental breach of the implied term of mutual trust and confidence. He queried the payments at the time but was told they were correct. The general rule is that if an employer has overpaid an employee, even though this is often the employer’s responsibility, the overpayment of wages will still need to be repaid. However, employers should exercise extreme caution when seeking to deduct any outstanding debts from an employee’s final wages, as any incorrect calculations could be classed as an unauthorised deduction for which the employee can bring a claim in the employment tribunal. If you would prefer NOT to receive this information by email please cross this box, Please select which newsletters you would like to receive, Your choice regarding cookies on this site, Probate Solicitors (Following A Bereavement). Recovery of overpayment is allowed as long as it doesn't cause the employee's wages to drop below minimum wage based on the hours worked in the pay period. To control which cookies are set, click Settings. You can learn more detailed information in our Privacy Policy. While modern computerised payroll systems are very reliable, occasions still arise where employees receive overpayments of wages, and we have seen a few examples recently. As with any overpayment for wages, it is always best for an employer to first consult with the employee to clarify the extent of any outstanding monies, and to agree a sensible way forward. Financial hardship or distress regardless of whether or not the full amount of Act! 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