Home > Management Relations > FAQ: The Legalities of Salary Overpayments

FAQ: The Legalities of Salary Overpayments

By: Garry Crystal - Updated: 11 Apr 2018 | comments*Discuss
 
Deductions Salary Overpayment Employer

Employers are legally entitled to recover salary overpayments. Employers are not actually required to inform employees that these deductions will take place although an agreement should be reached over deductions.

Why Would Salary Overpayments Occur?

It’s quite easy for a mistake to be made over the amount of salary an employee is paid, especially with new employees. The wrong salary figure could have been entered by the payroll department or given to payroll from a manager. In some cases the overpayment may be so small that it could go unnoticed by the employee for months. Employees will usually notice if they have been underpaid but many will never bother querying overpayments, especially small ones. But the overpayment may not even come to the employee’s attention until the employer gives notification of overpayment.

Should Employees Inform Employers if Overpayment Occurs?

If an employee does notice that an overpayment has occurred they should inform employers immediately. These overpayments will simply build up over time. When the employer does notice the overpayments they can actually deduct it from the employee’s next salary. Employees should contact the payroll department to query the overpayments. An employee who allows the payments to build up could be accused of dishonesty by the employer.

Can the Employer Deduct the Overpayments from One Salary?

By rights an employer can deduct all of the overpaid salary from the employee’s next salary payment. This can of course cause difficulties for the employee. But there is no actual employment protection rule that safeguards against this happening. Salary deductions for overpayments are exempt from the Employment Rights Act 1996, which sets out the employee’s rights on wages protection. An employer is legally entitled to recover the overpayment from a single salary.

Should an Employer Inform the Employee of Deductions?

Employers should inform employees of the overpayment situation and the deductions that are going to occur. A good employer will consult with the employee and set up a deduction arrangement that will not cause the employee financial hardship. Employees who did not notice the overpayment may think that because the money has been spent they should not have to pay it back. But complaining about the deduction may not be a good idea if an amicable agreement is to be reached over deductions.

What Are the Alternatives to a Single Salary Deduction?

An employer and an employee should come to an amicable agreement over the frequency and amount of deductions. The employer should ask the employee if a single salary deduction would cause financial hardship. An agreement should be reached on deductions that an employee can comfortably afford such as a period of deductions by instalments. The employer could suggest a short term loan that will help while the overpayments are being deducted.

Can I Complain to Anyone About the Deductions?

Salary deductions for overpayment are exempt from the Employment Rights Act. This means employees who have had deductions made for overpayments cannot take the matter to an employment tribunal. It is possible for employees to sue the employer through the civil courts. An employee would have to prove in court that it was unfair and unreasonable of the employer to deduct the overpayments. Taking the matter to the civil courts is a serious matter, especially if the employee is still employed at the company they are suing.

What Would the Court Consider to be Unfair and Unreasonable?

There are a few reasons why the deductions could be seen as unfair and unreasonable. If the employee had queried the overpayments issue with the payroll department and was then informed that the payments were correct. The employee could then assume they were entitled to spend the money without any recourse. It may also be the case that the employee spent the money after believing they were genuinely entitled to it. If these reasons were applicable then a court may favour on the side of the employee.

What Reason Would a Court Side with an Employer?

A court could favour the employer if it looks as if the employee is trying to benefit from a genuine mistake made by an employer. The ‘unjust enrichment’ principle is a view often taken by the courts. Even if the employee has spent the money under a genuine assumption that their salary figure was correct the court could still side with the employer.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
[Add a Comment]
NIKNIK - Your Question:
I applied for a TA position in a school working 2 days a week, I was given my contract which I signed and returned 18 months down the line I have now been informed that the contract was for 2.5 days and they have been overpaying me and have now asked for the money back, what is my rights?

Our Response:
If the contract you signed was for 2 days and that's what you thought you were being paid for, you may not have to pay this back - you need to contact someone who can look at your contract. Try ACAS for more information
WorkRelationships - 11-Apr-18 @ 3:08 PM
I applied for a TA position in a school working 2 days a week, i was given my contract which i signed and returned 18 months down the line i have now been informed that the contract was for 2.5 days and they have been overpaying me and have now asked for the money back, what is my rights?
NIKNIK - 11-Apr-18 @ 12:19 PM
Hi, I have just been overpaid last Thursday by 1000 pounds. The payroll lady was out of the office. I went to see her first thing Tuesday after bank holiday and asked if I could repay the money to ensure my P60 was correct. We are now 3 days on and so many excuses and she said she would give me all the details today to ensure the money was back in time for the correction. No surprises she did not come to work and emailed in to say don't worry about she will take back overpayment next month (month 1). This will now leave my P60 incorrect and next year's also. She suggested about doing an earlier year up date but I am still left with an incorrect P60. Is this even aloud? given that I have made all attempts to repay the overpayment which they did not even know they did. Thanks
H705 - 5-Apr-18 @ 9:49 PM
My internship contract was extended for another 6 months and I terminated it early as I got a proper job. I notified the agents and my manager and finished working at the end of September. I was paid until the end of my contract, a month and a half later. However, I know that I owe them money but my contract actually states that the intern shall inform in writing immediately upon termination of the agreement by either the client or the Intern. A failure by the Intern to comply with the provisions above may result in the intern being liable to repay any overpayment made etc etc. As I did notify them, and so did my manager, several times, am I still liable to repay? The contract isn't very comprehensive and that clause seems to state otherwise... Thanks in advance
vra - 26-Mar-18 @ 1:34 PM
Nicole - Your Question:
I started my job 15 months ago after being on maternity leave. I applied for a full time job and did work full time for the first few weeks. I then realised I was struggling to work full time and was missing out on valuable time with my baby. I went straight the area manager and emailed him asking if I could drop one day a week - so to work 4 days. He said he would discuss it with my branch manager and would be in contact with me. when I went to work the next day, my manager told me it has been agreed for me to take every money off and that was all that was said. A few weeks ago it was decided that my role (admin) would be changed to a property manager and was called into a meeting to discuss this. in the meeting, it was brought up that I had been wrongly paid for all this time and they would look to recover it. Nothing further was said, I then revived a letter home to say that I owe £5000 and that they were going to deduct this in £500 instalments starting from March's pay. Can they do this? where do I stand?

Our Response:
Yes if you were overpaid, your employer is entitled to recover it. Make sure you check that the overpayment is correct - ask your employer to give you full details. Was this something you should have noticed in your pay? Did you question it at the time?
WorkRelationships - 26-Mar-18 @ 10:57 AM
Hi left a job back in April last year for a new job. My previous employer got in contact with me to say she had over paid me, she told me should would text me their bank details so I could pay them back. A week later I finally revived a letter with her details, but by this time all my house hold bills had gone out so couldn't pay the full amount. Solicitors got involved on her side. Due to health I became unemployed and was living off help from family. I love alone. I wrote a letter saying that id pay back £10 a month until I gained my health and could start work again i would increase the amountI paid back. I'm still not working yet I have revived a letter from their solicitor again saying they will take me to court as I'm not paying the amount that they won't back. I never agreed to their terms as I knew I couldn't afford it. I have paid every month since tbis, not missing one payment or even been late with the payment. Can they still take me to court?
DairyQueen - 24-Mar-18 @ 5:02 PM
I started my job 15 months ago after being on maternity leave. I applied for a full time job and did work full time for the first few weeks. I then realised I was struggling to work full time and was missing out on valuable time with my baby. I went straight the area manager and emailed him asking if I could drop one day a week - so to work 4 days. He said he would discuss it with my branch manager and would be in contact with me. when I went to work the next day, my manager told me it has been agreed for me to take every money off and that was all that was said. A few weeks ago it was decided that my role (admin) would be changed to a property manager and was called into a meeting to discuss this. in the meeting, it was brought up that I had been wrongly paid for all this time and they would look to recover it. Nothing further was said, I then revived a letter home to say that I owe £5000 and that they were going to deduct this in £500 instalments starting from March's pay. Can they do this? where do I stand?
Nicole - 23-Mar-18 @ 12:27 PM
I left an employer in mid 2015 and they now wish to recover an overpayment of an allowance which they paid and that they say I was not entitled to for my last six months of my employment.This allowance was applied to my salary and I did not request it.As pay statements were not issued (only accessible on line) and the amount was £200 a month I did not notice the change.I feel that after the time lapse this is unreasonable, particularly as I am unemployed.Do I have grounds to challenge my ex-employer?
Dave - 14-Mar-18 @ 11:57 AM
I am 17 and have left my weekend job the company allege that they have made an overpayment and are demanding the payment back and are threatening debt collectors. Where do I stand?
Alexaginge - 23-Feb-18 @ 9:39 PM
I've work for my employer for 7 years for the first time I have been on sick for 5 wks my company only pay SSP they pay wages two weeks in advance. I received my first SSP wage today and they have deducted the whole amount and left me with no money for this month. I have spoke to wage clerk and she has said I was over payed last month ( this being the two week advance payment) that's why they have deducted the SSP my question is are they allowed to do this without informing me in advance? As they have put me in a really bad situation as I have no money at all to live off for the next 4 wks
Squibz - 16-Feb-18 @ 1:31 PM
L17cme - Your Question:
I have been getting my shift allowance of 11% on top of planned, uninterrupted, expected and on a rota overtime for months since the day I started. My employer now says this is wrong, in my contract it states I get my salary plus 11% shift allowance and that I can be asked form time to time to do overtime, it doesn't state at a reduced rate of basic pay for overtime. Can my employer change this even though it took me 3 attempt to get my payroll to look at my wage correctly.

Our Response:
This is a question about how your contract is being interpreted. The easiest way to resolve this is get a professional to look at your contract...ACAS, an employment law specialist etc.
WorkRelationships - 7-Feb-18 @ 2:29 PM
I have been getting my shift allowance of 11% on top of planned, uninterrupted, expected and on a rota overtime formonths since the day I started. My employer now says this is wrong, in my contract it states I get my salary plus 11% shift allowance and that I can be asked form time to time to do overtime, it doesn't state at a reduced rate of basic pay for overtime. Can my employer change this even though it took me 3 attempt to get my payroll to look at my wage correctly.
L17cme - 6-Feb-18 @ 5:27 PM
Z - Your Question:
Hello, I worked for the nhs from the 13th november-24th November. I resigned with immediate effect due to personal circumstances. I emailed my resignation and my manager was fine with that and didn't ask for me to write a letter. At the end of January 2018, I received a letter saying I had been paid at the end of December 2017 but I had no idea this had been paid in so obviously the money has gone on bills. I never received this second payslip or p45. Payroll have now said they want all the money back! I do not work and my partner works part time on a zero hour contract, we also have four children so I have no way of affording to pay this. Amy advice please?

Our Response:
Sorry but all you can do is try to negotiate with the employer to see if they're willing to recoup the overpayment in stages.
WorkRelationships - 6-Feb-18 @ 2:06 PM
Hello, I worked for the nhs from the 13th november-24th November. I resigned with immediate effect due to personal circumstances. I emailed my resignation and my manager was fine with that and didn't ask for me to write a letter. At the end of January 2018, I received a letter saying I had been paid at the end of December 2017 but I had no idea this had been paid in so obviously the money has gone on bills . I never received this second payslip or p45. Payroll have now said they want all the money back! I do not work and my partner works part time on a zero hour contract, we also have four children so I have no way of affording to pay this. Amy advice please?
Z - 5-Feb-18 @ 1:31 PM
Stacey - Your Question:
Hello.I worked for the NHS over 4 years ago and they've been sending out invoices for overpayment. Phoning up and leaving voicemails on my phone whilst I'm working. I've had to have 3 people calling me in one week. The overpayment was when I left the job, I was taking holiday before I left. They've argued that I never had this confirmed? But I would never have left without it. As it was so long ago I don't have any evidence off this. I just wanted to know how long the employer can try to receive overpayment from an ex-employee? Thank you

Our Response:
There are no rules that we know of. Don't ignore the calls, get back in touch and ask for evidence of when and how the overpayment occurred. Even if your holiday wasn't confirmed you'd still have been entitled to payment for any untaken leave in your final salary payment.
WorkRelationships - 31-Jan-18 @ 12:42 PM
Hello. I worked for the NHS over 4 years ago and they've been sending out invoices for overpayment. Phoning up and leaving voicemails on my phone whilst I'm working. I've had to have 3 people calling me in one week. The overpayment was when I left the job, I was taking holiday before I left. They've argued that I never had this confirmed? But I would never have left without it. As it was so long ago I don't have any evidence off this. I just wanted to know how long the employer can try to receive overpayment from an ex-employee? Thank you
Stacey - 30-Jan-18 @ 4:54 PM
Maria1312 - Your Question:
I was overpaid by work back in November, and for subsequent pay checks. Back in November I brought the information to the HR department and she took a photocopy and brought it up with payroll. I have an email from the HR manager saying that the payroll department said there was no mistake and the money is mine.This morning I received a letter saying I owe them £1500. I have handed notice in and I'm moving home to mind my disabled sister so will not have a source of income. I emailed them and queried about the email I was sent and also asked to set up a meeting and a breakdown of what exactly I owe them. What legally can they do with the money? I'm happy for them to take a portion of my remaining paychecks but that will not cover £1500

Our Response:
If you have received documentation from your employer saying that there was no mistakeand that the money was rightfully yours, then it's likely this will be sufficient evidence to dispute this. Contact ACAS for some indivdual advice.
WorkRelationships - 26-Jan-18 @ 2:19 PM
I was overpaid by work back in November, and for subsequent pay checks. Back in November I brought the information to the HR department and she took a photocopy and brought it up with payroll. I have an email from the HR manager saying that the payroll department said there was no mistake and the money is mine. This morning I received a letter saying I owe them £1500. I have handed notice in and I'm moving home to mind my disabled sister so will not have a source of income. I emailed them and queried about the email I was sent and also asked to set up a meeting and a breakdown of what exactly I owe them. What legally can they do with the money? I'm happy for them to take a portion of my remaining paychecks but that will not cover £1500
Maria1312 - 24-Jan-18 @ 1:15 PM
I've been overpaid at my current company and we agreed on paying a monthly sum each month I have now handed my notice in as ive found another job and they are threatening to take my whole last wage and we didn't agree that we just agreed on 50 pound a month can they take my wage even though we agreed on a sum?
Dodger - 18-Jan-18 @ 3:26 PM
sez64 - Your Question:
I gave notice on 6th October 2017, last day was 6th November. My contract was never finalised and the company continued to pay me my monthly salary for November and December. I have brought this to their attention and now have to pay back what I have been over-paid. This is correct, isn't it?!

Our Response:
Yes you still need to pay back any overpayments, even if the error was on the part of the employer.
WorkRelationships - 15-Jan-18 @ 3:13 PM
I gave notice on 6th October 2017, last day was 6th November. My contract was never finalised and the company continued to pay me my monthly salary for November and December. I have brought this to their attention and now have to pay back what I have been over-paid. This is correct, isn't it?!
sez64 - 12-Jan-18 @ 6:52 PM
alibongo - Your Question:
My employer has decided that I was given three days holiday in 2015 and 2016 that I wasn't entitled to and deducted the full amount, equating to 3 day's pay, from my latest payslip in 2018 without any consultation, warning or explanation. As it was over 2 years ago I do not have the records to argue against their claims, although I am 100% certain that I took (and was granted) the correct number of days holiday for the years in question. They have 2 different systems for recording holidays taken and they seem to disagree with each other, so the error is on their behalf. What action can I take to recover my wages?

Our Response:
Ask to see their evidence. If it's not reliable and you're sure you didn't take more than your holiday entitlement, consider taking it to a tribunal for unlawful deduction of wages. You must contact ACAS first.
WorkRelationships - 10-Jan-18 @ 3:33 PM
My employer has decided that I was given three days holiday in 2015 and 2016 that I wasn't entitled to and deducted the full amount, equating to 3 day's pay, from my latest payslip in 2018 without any consultation, warning or explanation. As it was over 2 years ago I do not have the records to argue against their claims, although I am 100% certain that I took (and was granted) the correct number of days holiday for the years in question. They have 2 different systems for recording holidays taken and they seem to disagree with each other, so the error is on their behalf. What action can I take to recover my wages?
alibongo - 9-Jan-18 @ 7:18 PM
I had a disciplinary in which I held my hands up to 8 days off that I had been paid for. The disciplinary was a shambles from start to finish. They have now told me they are deducting 8 days salary @ £60 a day from my December wage. I have bills and financial obligations and £11 a day travel to and from work. I won’t be able to afford to get to work. Can they do this. I have asked if they would consider taking it from my annual leave entitlement, they’ve categorically said no. Please help, I’m so worried.
Plumby - 6-Dec-17 @ 7:28 PM
RJH - Your Question:
Hello. My hours reduced last October by 1.5 hours/week. My line manager notified payroll, and did all the relevant paperwork between us. They have continued to pay me for the original hours. At around that time my hourly wage went up, and I assumed the tax went down as my hours were less- in short it was not clear what my monthly pay should be. They tell me it should be 1/12 of my salary, but every month has been different, even taking into account holiday and sickness (hardly any). My payslip is available only electronically, and does not have the hours I worked on it, inspire of each month's pay being different. I found them confusing and relied on the fact that I also have to fill out a time sheet each month even though I am salaried - assuming that this should ensure my pay was correct. I have this double checked by my line manager as I am Dyslexic. They now want it back. I'm confused also because my colleagues didn't know they were entitled to time + 1/3 for overtime (I don't do this) and the company would only reimburse them for 3months as the mistake was theirs. I am worried about the money which was paid to me for over a year, and hurt by their double standards towards my colleagues

Our Response:
You should get someone to take a look at this on your behalf. Can you print the payslips off? If so, perhaps Citizens Advice might be able to help. If your pay slip seemed to reflect a pay increase and reduced working hours, then you could reasonably assume that it was correct.
WorkRelationships - 6-Dec-17 @ 12:26 PM
Hello. My hours reduced last October by 1.5 hours/week. My line manager notified payroll, and did all the relevant paperwork between us. They have continued to pay me for the original hours.At around that time my hourly wage went up, and I assumed the tax went down as my hours were less- in short it was not clear what my monthly pay should be. They tell me it should be 1/12 of my salary, but every month has been different, even taking into account holiday and sickness (hardly any). My payslip is available only electronically, and does not have the hours I worked on it, inspire of each month's pay being different. I found them confusing and relied on the fact that I also have to fill out a time sheet each month even though I am salaried - assuming that this should ensure my pay was correct. I have this double checked by my line manager as I am Dyslexic. They now want it back. I'm confused also because my colleagues didn't know they were entitled to time + 1/3 for overtime (I don't do this) and the company would only reimburse them for 3months as the mistake was theirs. I am worried about the money which was paid to me for over a year, and hurt by their double standards towards my colleagues
RJH - 5-Dec-17 @ 5:42 PM
dean - Your Question:
I went off sick in July and my employer paid me my normal wage instead of SSP. Although after tax I only received £1481, my employer is taking £1567 back. I just cant see how this is right if I should have received £356 SSP. I appear to be out of pocket right before Christmas?My total before tax was £1962. Tax deducted was £481. so left with £1481.SSP should have been £357.40 with £1.20 deducted as tax.They are not having any of it and saying it will sort itself out but I am changing jobs in a couple of weeks so don't want this lingering.

Our Response:
They are reclaiming what they paid you. The tax deductions should balance out in the following month(s) when you are paid less.
WorkRelationships - 5-Dec-17 @ 1:58 PM
I went off sick in July and my employer paid me my normal wage instead of SSP. Although after tax I only received £1481, my employer is taking £1567 back. I just cant see how this is right if I should have received £356 SSP. I appear to be out of pocket right before Christmas? My total before tax was £1962. Tax deducted was £481. so left with £1481. SSP should have been £357.40 with £1.20 deducted as tax. They are not having any of it and saying it will sort itself out but I am changing jobs in a couple of weeks so don't want this lingering.
dean - 4-Dec-17 @ 1:22 PM
Lanc95 - Your Question:
I left my job on 28th September this year and have not received a pay slip or p45 even though I asked 2 weeks ago why this was taking so long. I have been paid 2 months of full salary I know this is not right and I have emailed them to find out why. A email said that my leavers form had not been signed by my manager. I think they got my final pay wrong (gave me too much) but I have nothing to check. What do I do and can they take back all of the 1st months pay? I said I would give them back 1 months now. Thanks in advance.

Our Response:
You will be asked to pay back the amount overpaid. There are no specified time limts for P45 issue, but they are supposed to be issued without unreasonable delay.
WorkRelationships - 1-Dec-17 @ 3:48 PM
I left my job on 28th September this year and have not received a pay slip or p45 even though I asked 2 weeks ago why this was taking so long. I have been paid 2 months of full salary I know this is not right and I have emailed them to find out why. A email said that my leavers form had not been signed by my manager. I think they got my final pay wrong (gave me too much) but I have nothing to check. What do I do and can they take back all of the 1st months pay? I said i would give them back 1 months now. Thanks in advance.
Lanc95 - 30-Nov-17 @ 6:58 PM
Share Your Story, Join the Discussion or Seek Advice...
Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Topics
Latest Comments
Further Reading...
Our Most Popular...
Add to my Yahoo!
Add to Google
Stumble this
Add to Twitter
Add To Facebook
RSS feed
You should seek independent professional advice before acting upon any information on the WorkRelationships website. Please read our Disclaimer.