Overpayment of Wages

  • Pay & Benefits
Overpayment of Wages
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Peninsula Team, Peninsula Team

(Last updated )

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.

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?

Salary overpayment recovery time limit

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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