You may be an employer or perhaps a recruitment agency. If so there is every chance that you may have overpaid an employee at some time. You could have paid them the wrong wage, perhaps you paid overtime at an incorrect rate? Mistakes happen, sometimes these are low value, sometimes not! A common question is always “What do we do, can we get our money back“?

In the most simple of cases the mistake is picked up quickly, either someone has been over paid and lets you know or it is picked up during a wages reconciliation. The worst cases occur however when an employee leaves, or the mistake has been ongoing and gone unnoticed.

Of course we would like to be able to say that everyone is totally honest. They know to the penny what they should be paid and checks it, advising should there be a discrepancy. Unfortunately this is not always the case; often the extra funds have not been noticed, spent or eaten up in an overdraft facility.

Section 14 of the Employment Rights Act 1996 gives an employer the right to deduct the over-payment, but there are some key things to consider:

  • It is your error not theirs, so demanding and taking a hard line may cause a fall out.
  • Notify the person in writing what has happened, how it has happened and the amount in question.
  • If they have spent the money (even if you think they should not have) will deducting the full amount in one transaction from their next wage cause them undue financial hardship?
  • If you can agree a repayment plan it may be the best option.
  • If the employee has left, you may be lucky enough to have a final notice payment to make, which could cover the error. If not, again write to them. In some cases they might agree a repayment plan that either you take from their bank in which case, have them set up a standing order.
  • Where they do not agree to repay you, it can be more complex if they are still working for you. If matters are handled correctly, giving them a clear explanation and notice you are to make a deduction or start a repayment schedule makes more sense. Ensure you allow them time to respond to you as they may wish to come forward with a lesser amount.
  • Consider settling on a partial repayment

Before you consider any form of court action, take into consideration the value. Taking a current or former employee to court may reflect badly on you as a business. We know in reality it shouldn’t but the reality is it could.

It may help if you distance yourself and refer the matter to a third party. Please remember this is not traditional debt recovery and by referring the matter to a third party like ICM the emotion and frustration can be diffused often leading to a speedier resolution.