How To Recover an Overpayment of Wages

How To Recover an Overpayment of Wages

A modern accounts department uses sophisticated systems to ensure that a business’s finances are correct. Despite this, payroll errors do occur, and this can sometimes result in an employee being overpaid.

This is something that many business owners and accounts teams have encountered. This can be more commonplace in large companies. When this does happen, you need to recover the money appropriately and fairly. Overpayment of wages is a sensitive subject, both for the company and the employee.

Whilst this is true, the money was overpaid in error. As such, it does not belong to the employee and so you need to recover it. In this article, our debt collection experts explain the best way in which you can recover an overpayment of wages.

Recovering an Overpayment of Wages

Unlike a lot of other forms of debt, you can recover an overpayment of wages using many different methods. When recovering an overpayment of wages, you must handle all matters appropriately. Our experts have listed some of how you can recover your money fairly.

Remain Polite and Professional

For any case on the collection of money owed to you by someone, you should always maintain a professional and polite disposition. This is important, as a hostile approach will only make it harder to recover the money and agitate the employee. You can amicably resolve this professionally.

Looking at the Employee’s Contract of Employment

The best measure a company can take for making sure that there is no unpleasantness when dealing with the subject of overpayment of wages is to make what happens should this occur clear at the outset of their employment.

Including a section in the employee contract which covers this will be very helpful if they are overpaid. If this is not already in your contract of employment documents, you should put one in as soon as possible.

You should inform them of this during any induction process, as this can help to set expectations right away. Your employees will be aware of what needs to happen and should be cooperative with you in case an overpayment of wages does occur.

Legal Precedence – Overpaid Wages Law

The 1996 Employee Rights Act defines the rules for what you can and cannot do with regards to an employee’s wages.  It does state that employees are protected against unlawful wage deductions, but an overpayment of wages is not classed as this.

With this in mind, it is not against the law for an employer to deduct money from an employee’s wages if they have made an overpayment. If you choose to do this, you should inform the employee that this is going to happen – it may be an unpleasant shock to them if you don’t!

If you tell the employee that you made a mistake involving an overpayment of wages and you intend to deduct money from later payments. This lets them know and professionally will keep the situation amicable.

If the employee objects, you should remind them that your actions are completely appropriate and legal. The majority of employees will not read through their contract of employment. As such, you should arrange a meeting to discuss any issues relating to an overpayment of wages.

Dealing with a Large Overpayment of salary

You will be able to resolve small overpayments quickly and easily. If someone has made a small error, and an employee has only been overpaid by a small amount, a quick and polite conversation should be all that is needed.

Sometimes a payroll error is not spotted, and months can pass where an employee is being overpaid. If this does happen, a large sum of money may have been overpaid over time, leaving you with a bigger issue.

In cases such as this, it may not be possible for the employee to be able to pay the funds back all at once. Doing so may leave them in a difficult financial position. You can set up monthly payment plans can be set up to ensure that the money that has been overpaid