What happens if you accidentally overpay a staff member? Knowing your legal standing, and how to reclaim the money, can ensure you avoid a dispute with your employee.
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Can an Employer Recover Overpayment of Wages?
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HR management outsourcing is when a team of experts manage your HR by looking after your contracts, policies, and procedures.
These are the HR essentials every business needs. Without them, your staff could bring successful claims against you, you could lose thousands in legal fines, and even face prosecution. Never underestimate the benefits of HR support for a small business.
We have years of experience in providing HR for SMEs and HR management outsourcing. Contact us to see how we can support you, including HR advice for small businesses - as well as medium and large companies.
Good human resource management is having round the clock support when you need it the most.
Whenever there’s a staff challenge or an important legal update, you just pick up the phone and get the help you need – no matter the time or place.
The main benefits of HR outsourcing are:
- Cost saving: Reduces the expenses for such things are hiring, training and employing an in-house HR team.
- Time saving: Saves time for staff members away from HR tasks.
- Improves expertise and compliance: Provides ongoing advice and support to ensure complete and total compliance.
- Reduces risk: Reduces the risk of any payroll and compliance failures.
Outsourcing HR is cheaper than hiring internal staff and saves you money overall when it comes to your HR service. Plus, you avoid making mistakes that could cost you heavily in claims and legal fines down the line. Every business should consider HR support as a way to avoid claims.
Peninsula is one of the leading HR outsourcing services in the UK, and by working with us you get access to our HR advisory service. Contact us for your outsourced SME HR today.
The key functions of HR outsourcing services are:
- Payroll and benefits: Helps a business to manage employee wages, tax processing, and employee enrolment.
- Recruitment and onboarding: Helps with job descriptions, sourcing new candidates, interviewing, and ensuring a smooth onboarding process.
- Compliance with employment law: Helps to ensure compliance with ever-changing employment legislation.
- Employee relations: Helps to manage grievance and disciplinary procedures, and any ongoing support that's required.
- HR admin: Helps to handle and manage daily tasks, such as employee records, sorting employment contracts, and processing any leave requests.
- Training and development: Helps to create and deliver staff training programs to improve employees' skills.
Pay inequality has been a prominent, ongoing issue in the UK economy for years. Not only through gender, but the government has recently found disparities within ethnic and disability demographics.
When it comes to paying staff, employers must ensure the right amounts are given – especially for those not on full-time contracts. Pro rata ensures these employees are compensated correctly; and that includes wages, holidays, and benefits.
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Payroll mistakes can occur and this can lead to overpaying staff. If this has happened, what are your rights and can you reclaim the money?
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It’s essential to take the right approach to avoid a dispute with an employee, which could result in legal action. First of all, make sure you really have overpaid an employee.
Payroll may have reported the overpayment, or a staff member, but double check to ensure this is the case. If they have been overpaid, then you can reclaim the amount.
The sooner you act to rectify this the better—you’ll need to inform your employee as soon as possible. But in a contractual claim, it must be made within six years of the overpayment occurring.
If you try to claim after this six-year period, a judge would have to extend the limitation date, which may be done if the judge considers it fair to do so.
In many instances, if it has been six years, your business may have to accept the mistake and move on. Pursuing overpayments at that stage could be much costlier than the overpayment amount.
Reclaiming the overpayment
When overpaid by employers, a staff member may think they get to keep the money. When reality becomes clear, they could become defensive about handing it back.
They could even research if an employer overplays them whether they can take it back, along with their legal standing should they refuse. To ensure you don’t upset your employee, don’t automatically deduct the amount from their future wage.
You can take the claim back the overpayment, but you will want to do so in a manner that is fair for your employee. After all, they’ve done nothing wrong. Approach your staff member to:
Discuss with the staff member why there was an overpayment.
The amount that has been overpaid.
Provide evidence for them.
Explain how the repayment will be made.
Deductions from wages can be made in a lump sum, or over a series of instalments. If it’s a large overpayment, the latter may be more suitable in order to avoid disputes. This recovery period should be made in writing to your staff member.
Overpaid wages employee rights
There are common questions from employees regarding overpayments. These include:
“My employer has overpaid me, what are my rights?”
“If an employer overpays you, can they take it back?”
Regarding employment law overpayment of wages, remember your reclaim request could upset your employee.
For example, it could place them in financial hardship. It is your right to claim back the amount, as confirmed by ACAS, but you’ll need to get their permission.
If it proves difficult to agree a repayment, your employee has the right to turn to your grievances procedure to raise a complaint.
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.
For the best outcome, act as quickly as possible to recover the money. Make an informal request to your former employee.
If they refuse to cooperate, then you can take legal action. However, bear in mind your legal fees could far exceed the wage overpayment.
If you still wish to go ahead with legal action, then you should:
Obtain all possible information on the former employee’s situation and employment status—this will determine if they can make the repayment.
Suggest repayments via instalments to alleviate any financial stress they’re under.
Make a court claim against the former employee as a civil debt—this could help you recover the overpaid money.
Need more help?
Peninsula offers expert advice on overpayment of wages. Our teams provide 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.
Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.
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