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FAQ: The Legalities of Salary Overpayments

By: Garry Crystal - Updated: 16 Feb 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.

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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
My wife has been on sabbatical from work for 3 years but recently tried to go back, however it only last a day due to an issue with a childminder which went to Ofsted. However a few weeks later she was laid over £3000 for the one days work and wrote to her bosses to say she was incorrectly paid. They have since come back to say they will pay her more money in order to resolve it, and she will need to pay the gross figure back which we don't have as she is not working.. We want to lay them back, but have refused to pay the gross amount and they have offered no solution around the tax or how to pay the money. All very stressful, due to their incompetence. Any advise on what we can do?
Bigdave - 29-Nov-17 @ 10:30 PM
CD - Your Question:
I left my job in March this year and had been paid the next month which I assumed was wages owed to me but never spent the money just in case, then the next month I received another full wage so I contacted my old manager who apologised as they forgot to tell payroll. 8 months later I have received a letter looking for it to be paid back with 1 week. They have added more money onto the invoice which I have Bank statements to prove this? What rights do I have? Of course I know the money has to be paid back but how can they add on more payments?

Our Response:
Write to them and ask them where the additional payments have come from first then you can agree to pay whatever you rightfully owe.
WorkRelationships - 29-Nov-17 @ 3:04 PM
SWald - Your Question:
Hi, my new employers overpaid me by around £450 this month. I told them immediatly and they are going to take it back. However becuase of the overpayment I also paid considerably more in deductions and in fact when they take the £450 (gross) back I will be around £250 worse off in my pocket this month because of the difference in deductions. They have said it will work itself out by April but because it is my pay packet leading up to Xmas I can't afford to not have the money. How can this be resolved please?

Our Response:
No there's not much you can do about this and yes, it will "work itself" out over the course of a few months. £250 deductions on a gross payment of £450 sounds like a bit of an exaggeration, have you calculated this correctly?
WorkRelationships - 28-Nov-17 @ 3:11 PM
Hi, my new employers overpaid me by around £450 this month.I told them immediatly and they are going to take it back.However becuase of the overpayment I also paid considerably more in deductions and in fact when they take the £450 (gross) back I will be around £250 worse off in my pocket this month because of the difference in deductions.They have said it will work itself out by April but because it is my pay packet leading up to Xmas I can't afford to not have the money.How can this be resolved please?
SWald - 27-Nov-17 @ 6:18 PM
I left my job in March this year and had been paid the next month which I assumed was wages owed to me but never spent the money just in case, then the next month I received another full wage so I contacted my old manager who apologised as they forgot to tell payroll.... 8 months later I have received a letter looking for it to be paid back with 1 week. They have added more money onto the invoice which I have Bank statements to prove this? What rights do I have? Of course I know the money has to be paid back but how can they add on more payments?
CD - 26-Nov-17 @ 4:44 PM
My employer overpaid me and I've now been dismissed from the role however I have just received my wage slip due to be paid on 1st December and received an email asking for my rota before the first of December so the manager can 're do my wages. Can they deduct monies due the 1st even though I've received my wage slip?
Leelee - 25-Nov-17 @ 5:38 PM
I went from a shift supervisor to a day shift supervisor and payroll never amended my pay as apparently shift supervisors were put on a higher rate unawares to myself and now 2.5 years later it has been brought to their attention and they're wanting this money paid back now I'm worried how much they can take each week which I can't really afford. Where do I stand? Thanks
Weegraeme - 21-Nov-17 @ 2:14 PM
Sam - Your Question:
A year and a half ago my girlfriend was asked to cover a managers role within her company. Her salary was increased accordingly. When a new manager started she returned to her old role. However her salary remained at the manager level. On month one she informed her managers and payroll that she believed she may have been overpaid. They stated it would be looked in to. Month 2 the same thing happened. Once again she was informed it would be looked into. Month 3 the same thing happened. At this point she informed them for a 3rd time and stated that barring any communication or change in her salary she assumed that this was now correct and they had decided to keep her on the higher salary. No response was received. Now a year and a half down the line someone has decided that she has in fact been over paid and they want it all back. Where do we stand legally here? Would this fall under estoppel law? We're 7 months pregnant and could really do without the stress of it let alone the financial impact!

Our Response:
Did the employer respond to the final communication (even if it was just to say they were still investigating)? If they didn't respond, when they had the chance there may be a legal loophole which gives her the right to keep it. We can't really advise on this as we don't have sight of the full correspondence and details. Try ACAS first of all.
WorkRelationships - 17-Nov-17 @ 3:13 PM
A year and a half ago my girlfriend was asked to cover a managers role within her company. Her salary was increased accordingly. When a new manager started she returned to her old role. However her salary remained at the manager level. On month one she informed her managers and payroll that she believed she may have been overpaid. They stated it would be looked in to. Month 2 the same thing happened. Once again she was informed it would be looked into. Month 3 the same thing happened. At this point she informed them for a 3rd time and stated that barring any communication or change in her salary she assumed that this was now correct and they had decided to keep her on the higher salary. No response was received. Now a year and a half down the line someone has decided that she has in fact been over paid and they want it all back. Where do we stand legally here? Would this fall under estoppel law? We're 7 months pregnant and could really do without the stress of it let alone the financial impact!
Sam - 16-Nov-17 @ 7:06 PM
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