Overpayment at Work Legal Uk


The salary includes remuneration for the work you do according to your job, bonuses, commissions, paid holidays. Statutory payments such as maternity and sickness benefits are also considered wages. Loans and severance pay are examples of payments that do not represent a salary. Claiming an overpayment without prior notice to the employee, or doing so in a manner that causes hardship, could constitute a breach of implied trust between employer and employee. This breach could be sufficient grounds for de facto termination. However, workers and blue-collar workers are protected from unlawful wage deductions under section 13 of the Employment Rights Act 1996. The exception is section 14 of the Act, which provides for the case of overpayment and allows employers to make a deduction and correct the error. In addition, an explicit provision in many employment contracts allows payroll errors to be corrected. Talking honestly and transparently with your employer about what would be a feasible amount that could be deducted from your salary to repay the overpayment is more likely to lead to an agreement between them and avoid a breakdown in your employment relationship. You can even agree to write off a portion of the overpayment in certain circumstances, which is of course subject to the agreement. You may be able to argue that you have a defence if your employer tries to recover the overpayment. The defence is made on the basis that you have changed your position, that you have become dependent on the money and that you have spent it, and that it would be unfair to demand that you pay back the amount. By law, your employer or agency is allowed to recover an overpayment of your entire salary, unless your contract or policy provides otherwise.

However, getting an overpayment this way often doesn`t make sense. For example: if you`ve paid £100 a month in the last 6 months, it wouldn`t make sense for the employer to deduct £600 from the next month`s salary. This could cause you financial problems and have serious consequences on your mortgage/rent and other expenses. The Employment Rights Act 1996 protects workers from unlawful deductions from wages. However, it allows an employer to recover an overpayment. The law on overpayment of wages only applies if the salary has been overpaid. An employer cannot use the law to cover other types of employment costs, such as training costs, or material costs, such as uniforms. Most salary overpayments can be settled amicably. If; Ideally, an employer should first notify the employee in writing. There is no mandatory information to give, but an explanation of how the mistake was made, the amount of the overpayment and, if several mistakes were made, how long they were made, will likely help the employee understand how much money needs to be repaid and why. It`s also a good idea to suggest how the money could be repaid.

Upon receipt, carefully check these details with your own records. Most employers have a document explaining your pay. Read this and check. Do you agree that an overpayment has been paid and do you agree with the amount owing? If “yes” goes to step 3, if “no”, go to step 4. If it`s a simple overpayment included in weekly or monthly payroll, they`ll usually deduct it from your next paycheck. You can also agree to refund the money by other means, such as bank transfer. However, it is crucial to recover the overpayment over time so as not to cause financial hardship. There are many circumstances that can lead to overpayment of wages. Workers find themselves in a situation where they are often confused about what happens when there is too much pay and what their employers can or cannot do. Jo is a social worker and recently resigned.

18 months ago, her employer paid her to take a course that helps her become fully qualified. Her contract states that she must reimburse all tuition fees if she does not stay with her employer for 2 years after completing a course. The common law defence is usually the strongest line of defence for an employee and is based on restitution law. A person can invoke this defence against the claim for overpayment of wages (generally) if he or she meets the following conditions: You should only be required to repay the amount of overpayment you actually received. It is your employer`s responsibility to make arrangements for the collection of taxes and social security. Check your contract or if there is a written agreement that says what to do if you have taken too much vacation when you leave a job. This could mean reimbursing your employer or having to work extra days without pay. Your employer can only ask you to reimburse them or work extra days if there is a written agreement.

Your employment contract may include an explicit provision whereby you agree that your employer will make deductions from your wages in order to receive an overpayment if you are still an employee. If your contract allows your employer to recover the overpayment, they can rely on it. If the overpayment is a long time ago or if the overpayments have been going on for several weeks or months, your employer should: A claim for overpayment of wages is a contractual right. Claims under contract law must be filed within six years of the alleged breach. If an application is made more than six years after the relevant date, the application would be “late” unless the judge chooses to exercise his or her discretion and extend the limitation period (this usually happens when it is fair and equitable). The only time your employer can take money without a written agreement is to take over a previous salary overpayment. The MRC believes that employers should act wisely and negotiate a repayment plan acceptable to both parties. In our experience, most overpayment issues can be reasonably resolved without the need for RCN support. If an overpayment is not detected until after an employee has left and refuses to make a voluntary refund, the employer should consider legal options. These may include: To summarize the steps involved in recovering an overpayment, you should: It is important for employers to understand why overpayments can occur and how to properly recover funds to prevent lawsuits and litigation. If the employee no longer works for the organization, it can be very difficult to recover overpayments. However, the employer`s right to recover overpaid wages remains.

If not, your employer does not have the legal right to deduct money from your last salary, even if you have to reimburse vacation or work overtime. If they deduct it, it is an unauthorized deduction, even if you owe them money. Under the Employment Rights Act 1996, employers in the UK can deduct money from future wages until the full amount of the overpayment has been received. The employer has the right to deduct amounts to recover overpayments. Therefore, it is likely to happen this way if the employee does not accept another solution. Other factors are considered in determining whether the defence is applicable. For example, the amount of the overpayment and the repayment of your financial situation. A well-drafted employment contract should include a clause allowing corrections to be made to overpayments if they were made in error. A procedure may be provided for in the contract. Of course, it is logical for companies to pursue a policy of recovery of overpayments.

First, it helps to know what constitutes an overpayment. This is essentially a payment that you receive and that you are not entitled to at the time of execution. For example, if a payroll or administrative error caused you to receive more than your monthly salary. Payroll deductions to correct an overpayment can be made as a lump sum or in multiple installments. However, employers should notify employees and seek an agreement prior to deductions. If the overpayment is significant, spreading collection over a period of time will help avoid disputes. Ideally, a collection agreement should be written and signed by both parties. The agreed adjustments can then be made in the payroll. `Where the purpose of the deduction is: (a) to reimburse the employer for an excessive payment of wages; or (b) the overpayment of expenses incurred by the worker in the performance of his or her duties and imposed on the worker by the employer (for whatever reason).” This applies in particular if an overpayment has regularly occurred over a longer period of time or if an overpayment is not detected until much later.