Can I charge an employee for overpayments?
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Some 11% of officer workers said they had been overpaid by their employer, according to a survey by the Global Payroll Association (GPA). And the majority informed their employers, with 77% saying they told their employer about the over payment.
Interestingly a third (37%) of employees did not have to repay the overpayment and did not have their pay reduced going forward in order to repay the discrepancy. But companies took action in 63% of cases, deducting the overpayment from salary cheques going forward.
The survey of 6,388 UK office workers also found that 39% of employers never flagged the issue, although 14% were on the ball and highlighted the overpayment within a day.
However, more than one in four (28%) employers took up to a month to identify the overpayment while a minority of 1% of laggards did not notice the error for more than a year.
The main reason for the overpayment was miscommunication by management to payroll, cited by 61%, while 18% of mistakes were down to a payroll error. Only 3% of respondents blamed a software error.
Melanie Pizzey, CEO of the Global Payroll Association, said: ‘Overpayments usually result from miscommunication and in the vast majority of cases it’s simply down to a change in circumstances that isn’t relayed to payroll, either in time for their monthly cut off date, or at all.
‘This can be a challenging issue to overcome for payroll departments as even the most modern of systems cannot account for human error in such instances.
‘It highlights the importance of investing in proper payroll professionals, not just payroll tech, as doing so can ensure that your payroll function operates as it should, without the inconvenience of retrieving overpayments made to employees.’
Overpayment is usually a result of errors made within various departments when reporting information to payroll teams. For example, HR or line managers may have provided incorrect details for employee records, they may have failed to notify payroll when an employee leaves the company, or they have done so after the monthly cut-off date.
Miscommunication between management and payroll was the leading cause when it came to overpayment of employees, the GPA found.
When the error is spotted, the employer has the right to reclaim the money that has been incorrectly paid.
While the Employment Rights Act 1996 does protect employees from unlawful wage deductions, there is an exception relating to cases of overpayment. This allows employers to correct the error by either asking for the money back or deducting it from future payments.
Employers also commonly include a clause in the employment contract which stipulates that, in the event of an overpayment, deductions can be made from future payments.
If an employee has left the company after receiving an overpayment, the employer still has the ability to claim it back, either through an informal request, or, if needed, a formal legal process.
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