Recovering an overpayment of wages after an employee has left. An employer is legally entitled to recover any overpayment of wages, either during the currency of the contract of employment, as well as after the employee’s contract has come to an end. However, where a historical overpayment only comes to light several years down the line, section 5 of the Limitation Act 1980 provides a time limit of six years. Make an informal request to your former employee. However, recovering the overpayment over time, so as not to cause financial distress, is key. The deduction can be made either by a lump sum or instalments and can be taken directly from the employee’s … The only time your employer can take money without any written agreement is to take back an earlier overpayment of wages. That said, over time, even small overpayments can amount to a sizeable sum that must be repaid. In extreme cases, this could even result in the employee feeling forced to resign, with a potential claim for constructive dismissal, provided the employee has the required continuous service of no less than two years. He queried the payments at the time but was told they were correct. Use our benefits checker to see what you might be able to apply for. Employees and workers are protected from unlawful deductions of wages by section 13 of the Employment Rights Act 1996 (the Act) which prevents employers making deductions unless these are: 1. required/authorised by statute, 2. permitted by a provision of the employment contract, or 3. where prior consent has been received from the employee. 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. In the context of an overpayment of wages, the action is founded on the contract of employment, such that the six-year limitation period will apply. Such termination would likely even be considered for cause, which could affect the employee’s right to unemployment insurance. In section 14 of the Employment Rights Act 1996, it says that an employer may make a deduction from a worker’s wages “where the purpose of the deduction is the reimbursement of the employer in respect of (a) an overpayment of wages; or (b) an overpayment in respect of expenses incurred by the worker in carrying out his employment, made (for any reason) by the employer to the … 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). So, generally speaking, an employer is allowed to recover overpayment of wages from an employee so long as he or she is still employed by them. 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. If you already spent the funds, ask the payroll department to set you up on a payment plan. Contact us for help and advice if you are facing an overpayment of wages issue. However, the right of the employer to reclaim overpaid wages remains. 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. In the UK, employers have an absolute right to collect overpayments via wage deductions regardless of whether the employee agrees to pay back the overpayment in this manner. This would involve raising the issue with the employee to explain how you intend to recover the money, usually by deducting from the employee's future salary payments until the amount is paid off. Further, the employer can recover an overpayment from an employee’s wages in full, from one single pay packet, unless, again, the contract provides otherwise. In order to recover the overpayment… After spending the last month "on the sick" she is entitled to SSP. You can learn more detailed information in our Privacy Policy. This category only includes cookies that ensures basic functionalities and security features of the website. The Court of Appeal decided that the defence of estoppel prevented the Council from recovering the full amount of the overpayments. She has now resigned, and at the date of leaving she was only entitled to 11 days holiday. This could even include suggesting alternative ways in which the employee can repay the amount owed, for example, by working extra shifts or staying later each day. As a matter of good practice, however, even absent any express contractual provision requiring the employer to approach the recovery of any overpayment in a particular way, employers should notify the overpaid employee prior to making any deductions and, in some cases, the parties may even be able to reach an agreement in the form of a repayment plan. This should be done informally at first, albeit in writing. 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. Most awards say that an employer can deduct up to one week's wages from an employee's pay if: the employee is over 18 the employee hasn't given the right amount of notice under their award the deduction isn't unreasonable. If the employee no longer works for the organisation, then it can be very difficult to recover overpayments. The technology to maintain this privacy management relies on cookie identifiers. The employee brought a claim for deduction of wages and the tribunal ordered the employer to pay the £278.50 it had withheld. Wages are defined in section 27(1) of the Act as any sums payable to the worker in con… The following guide looks at the rules relating to the overpayment of wages, including the process employer should follow to reclaim any overpayment, the time within which this should be done and how to approach recovering wages after an employee has left the company. But is it still wages if you are not employed anymore? How to repay the full amount of your overpayment If the final earnings do not permit recovery of the total amount owed, the agency may follow the requirements of Subsection 25.80.40 and turn the debt over to a collection agency. In these circumstances, an employer can only seek to recover this money, either by way of a final deduction from the employee’s salary or via the courts, where there is express provision to do so within the employee’s contract of employment, or it has otherwise been agreed in writing. This form is sent by the Pay Centre as part of the termination procedures to the Pension Centre. Statutory Employment Payments Changes 2021-2022. However, it is usually good practice for an employer to first consult with an employee before making wage deductions for an overpayment, and for an agreement to be reached as to how repayment will take place, not least to avoid any potential conflict and to preserve the working relationship between the parties. This means the employee must sign the employment agreement AND agree to each individual request for a pay deduction or 2. the request is made by a court order or the Employment Relations Authority By submitting, you agree to our Privacy Policy. 6183275 Always have a clear policy on overpayments in the employment contract and employee handbook, which says employees must report overpayments to their manager immediately. The Employment Rights Act 1996 says that an employer is not authorised to make a deduction from an employee’s wages unless the deduction is authorised by statute (i.e. It is mandatory to procure user consent prior to running these cookies on your website. Removing or resetting your browser cookies will reset these preferences. Further, even though employees will nearly always query an underpayment, they may not necessarily raise concerns over any overpayment, especially small ones. This can be especially important where the employee owes a large amount of money that has accumulated over a long period of time. These cookies will be stored in your browser only with your consent. 542691 If you’re struggling financially because you had to pay your employer money You might be able to claim benefits if you haven’t started a new job yet. In other words, an employer will not be entitled to recover any overpayment of wages made more than six years ago. For the defence of estoppel to apply: In County Council of Avon v Howlett a teacher was overpaid sick pay. It is not uncommon for employees to be overpaid at work, especially new-starters, where the incorrect salary has been entered by someone in the payroll department, or erroneously provided to payroll by the employee’s line manager. "If you refuse, or fail, to repay the overpaid wages, you may find that your employer takes you to court. This would usually be by deducting set amounts from the employee's future salary payments. 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. As such, having identified an overpayment post-termination, the employer will need to request repayment from the employee. You have the right to deduct money from an employee’s pay if you recently made a simple overpayment. These cookies enable core website functionality, and can only be disabled by changing your browser preferences. An employer is legally entitled to recover any overpayment of wages, either during the currency of the contract of employment, as well as after the employee’s contract has come to an end. Equally, an employee may owe the employer money for something else, for example, a loan to cover the cost of a travel season ticket, or even for contractual maternity pay, where there is often express contractual provision about returning to work for a certain period of time after taking maternity leave. So where an overpayment is made and the recipient spends part of it, they can be ordered to repay the money that they have not spent. Speak to them and let them know how you're going to claim it back. If an employee has already left their job when the employer first discovers the overpayment, whilst this complicates matters from a practical perspective, it does not affect the employer’s legal entitlement to reclaim the amount. In Potter v Hunt Contracts Limited the worker owed the employer £523.00 under a loan. Typically, where an overpayment has occurred, the employer is able to recover the amount overpaid. You also have the option to opt-out of these cookies. The University reserves the right to recover any outstanding overpayments from salary and accrued leave entitlements to be paid out upon resignation, retirement, redundancy or separation from the University. You have 3 months less one day to make a claim to the Tribunal. This website uses cookies to improve your experience while you navigate through the website. We use cookies to optimise site functionality and give you the best possible experience. I can fully understand this during employment if the overpayment is not that high that you had to notice it - you would have assumed that you got the correct salary, and if the real salary was lower, you would have looked for another job. Moreover, an employee who deliberately allows overpayments to build up is potentially exposing themselves to allegations of dishonesty. To control which cookies are set, click Settings. In particular, where it is apparent that an employee has sought to benefit from a genuine mistake on the part of their employer, this could even result in disciplinary proceedings. Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. 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. It is... LexcelConveyancing Quality Cyber Essentials Plus, Basildon:Birkett Long LLPPhoenix HouseChristopher Martin RoadBasildonEssexSS14 3EZ Tel: 01268 244144, Chelmsford:Birkett Long LLPFaviell House1 Coval WellsChelmsfordEssexCM1 1WZ Tel: 01245 453800, Colchester:Birkett Long LLP1 Amphora PlaceSheepen RoadColchesterEssexCO3 3WG Tel: 01206 217300, Europe:BL Intellectual Property Malta LtdJunction Business Centre1st Floor, Sqaq LourdesSwieqiSt Julian'sMaltaSWQ 3334 Tel: 356-23-43-1042, Birkett Long LLP is authorised and regulated by the Solicitors Regulation Authority (Authorisation No:488404). But after leaving, your expectation should have been to receive zero. We'll assume you're ok with this, but you can opt-out if you wish. Click here for a full list of Google Analytics cookies used on this site. As such, it is important for employees to immediately notify their employer or payroll as soon as they identify any overpayment of wages, even a relatively small one, to avoid the accumulation of a much larger debt. Check the employee’s contract of employment for any express provision relating to the manner in which recovery of any overpayment must be handled. With respect to recovery of the overpayment, the employer has a right to bring recovery action in the civil courts which is usually a last resort, with most situations being resolved by agreement. Complete our form and one of our lawyers will be in touch. However, as with the training cost scenario above, an employer can only deduct this money from an employee’s final pay if there is prior written agreement permitting them to do so. In fact, in many cases, an overpayment of wages can occur in calculating the employee’s final salary. Debenhams - what does this mean for the employees? Regulated by the Solicitors Regulation Authority No. Notice of termination not given. The employer has the right to reclaim overpaid wages even if the employee has left the company. These cookies do not store any personal information. However, any set-off must be reasonable. For instance, if an employee has been overpaid in the last week or two it wouldn’t be unreasonable to require the whole amount to be repaid immediately. If the Employment Tribunal decides that a deduction was made unlawfully, the employer forfeits the amount that the tribunal orders to be paid or repaid. When he left the company the employer refused to pay him his wages of £278.50. Clicking the Accept All button means you are accepting analytics and third-party cookies (check the full list). If an employer is unable to enter into an agreement with the employee for repayment, the only legal method by which an employer can recover an overpayment is to make an applicable to the applicable court. However, even with fixed county court costs, employers should bear in mind that the potential cost of recovering the overpayment of wages, not least in terms of the time taken to do so, could far exceed what the employee owes. Section 5 states: “An action founded on simple contract shall not be brought after the expiration of six years from the date on which the cause of action accrued”. 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. Since the Avon case there have been further developments in this area of the law and the House of Lords has formulated the more flexible defence of “change of position”, which involves a recipient not having to pay any or part of an overpayment if it will be unjust for them to do so. Per RCW 49.48.200, any overpayment amount still outstanding at termination shall be deducted from the earnings of the final pay period. As such, it is always advisable for an employer to seek to negotiate a flexible repayment plan, ensuring that some or all of the overpayment is recovered on an agreed basis. So, generally speaking, an employer is allowed to recover overpayment of wages from an employee so long as he or she is still employed by them. Employers have the right to pursue and reclaim any overpayment in wages, even after the employee has left the organisation. In particular, the statutory protection against unlawful deductions from wages contained within the Employment Rights Act 1996 (ERA) does not apply in circumstances where an employer has mistakenly made an overpayment. Action should be taken quickly in case the final salary payment has not yet been made. 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