It may have happened to you or someone you know – you open your pay packet or check your payslip only to find that there is more there than you you’re expecting. You suspect that you have been overpaid but what do you do about it? A natural reaction might be to keep it and not say a word – but this is probably not the right course of action. In fact, it could be something you later regret.
Once your employer discovers that you have been overpaid they will be able to ask for the money back or even deduct it from your next wage packet and you might have some uncomfortable explaining to do.
Is an Employer Allowed to Recover Overpayment of Wages?
You may think you can argue that it is unfair that your employer is able to recover overpayment of wages; after all it was them that made the mistake. There is also the Employment Act of 1996 to think about; this lays down the rules for deducting money from an employee’s wage packet and it is only permissible under special circumstances. According to the protection of wages clause in the 1996 Act the employer can only deduct money from your wages if this is something that is stated in your contract. For example, the contract will give the employer permission to deduct money for your pension scheme and so on.
However, it would be a mistake to think that the protection of wages clause in the Employment Act 1996 means that an employer can’t recover overpayment of wages. This type of event is not covered as part of the protection of the Act and so it is not possible to appeal to this as a defence against an employer deducting money from wages. This is because the employer is not actually deducting anything from the employee’s payment just recovering the money that the employee shouldn’t have received in the first place. The only obligation that the employer has is to recoup the money in a ‘fair manner’ and if this doesn’t happen there may be reason for complaint.
It might be possible for an employee to fight this type of action by the employer in a civil court but it would be a hard case to win. You would not be justified in saying that you can’t return this money because you have already spent it on something. One possible defence against recovery of the money might be the ‘change of position’ principle where you would claim that a change in your circumstances means that it would be unfair for you to have to pay this money back. If it was the case that you did query the overpayment and you were reassured that your wages were correct then you might have a case for not paying it back. In general though, civil courts will tend to side with the employer because of the principle of ‘unjust enrichment’ which basically argues that one person shouldn’t get to benefit because of somebody else’s mistake.
How an Employer Can Recover Overpayment of Wages
There are two scenarios where an employer will attempt to recover overpayment of wages – when you are still work for them or after you have ceased employment with them.
Obviously it will be a lot easier for them to recover the money when you are still an employee because all they need to do is deduct it from your wages. A good employer will discuss the situation with you first before taking money from your wages; they might even offer you the option of paying back in instalments. If you don’t feel that it is fair to pay this money back at all then your best option is to follow the company’s grievance procedure. If you are still not satisfied with the situation you can then take the problem to an outside advisor like a solicitor or local Citizen’s Advice Bureau.
If you no longer work for the company then they can have more difficulty recovering the overpayment of money from you. They may try to enlist the help of a debt collector but unless there is a clause in your contract that says any money you owe to them after leaving employment is considered civil debt they will have trouble making you pay. If you do find yourself in the position where an ex-employer is making threats and asking for the money back you should seek legal advice.
If you would like to know more about payslip legislation or discuss outsourcing your company’s payroll, contact Robin Mead at Payplus on 0800 018 0590 email@example.com or request a quick quotation.