PAYROLL - 26.10.2020

Employee told to repay ten-year-old payroll error

Since 200 9

In October 2020 it was reported that Leah Francis (F) had been sent a shock bill from her employer. The employer, we’ll call them X, wasn’t named in the media reports.

F began working for X in 2004. In 2009 she went on maternity leave for one year. Before that leave started she asked to change her contract from full time to term-time hours.

New contract

Whilst this variation was agreed, F didn’t receive a new contract. Upon her return from maternity leave, F continued to receive the same salary payments as she did under her full-time hours arrangement and received several pay rises.

F claims that in 2019 she “innocently” showed a colleague her payslip. The colleague said F was earning more than she should be.

Error alert

After this conversation, F received a demand for repayment from X which set the total amount owed at £20,000.

F says that the overpayments equate to around £250 per month and she was upset that the error had never been picked up when pay rises were awarded.

What is the legal situation with regards to historic overpayments, and can they be deducted automatically from an employee’s salary or wages once spotted?

Employment myth

There’s a common misconception, usually amongst employees, that employers can’t recover overpayments from salary without the employee’s express permission or a contractual provision.

This isn’t true as the Employment Rights Act 1996 permits the recovery of overpayments made due to a mistake of fact, e.g. a computation error.

Make no mistake

In this case it could be suggested that there isn’t a mistake which entitles X to automatically recover the overpayments made to F. This is because only the change in her working hours, and not the new salary, appear to have been agreed.

Tip. Rather than relying on the legislation, it’s far safer to have a deductions from wages clause in your contracts (see The next step ).

Tip. If an overpayment is brought to your attention, don’t simply help yourself to a reimbursement from the employee’s next salary payment. Write to them about what’s happened and how you intend to rectify the situation (see The next step ).

Tip. An employee should never be placed in a position of financial hardship or paid less than the minimum wage when they’re required to reimburse an overpayment. Where the repayment is sizeable, always agree an affordable repayment plan.

For a deductions from wages clause and an overpayment of wages letter, visit https://www.tips-and-advice.co.uk , Download Zone, year 22, issue 19.