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 will be returned over a realistic time scale.

You can split the large sum into smaller, manageable payments which don’t impact the employee’s financial situation. You should put this payment plan into writing and then make sure the employee is happy with it. If so, both the employer and employee need to sign to confirm.

Overpayment of Wages to Ex-Employees

If you have overpaid an employee who has left the company, it is still possible to recover your money. As an employer, it is appropriate for you to request payment from the ex-employee.

It is best to ensure this process goes smoothly. With this in mind, you should include a section in the employee contract when they join the business that covers this scenario. If the employee refuses to repay you, it is acceptable to begin legal action against them.

If you have made an overpayment of wages, speaking to the employee about it can help to resolve the issue

Using a Debt Collection Agency to recover an overpayment of wages

If the employee is refusing to return the money they owe you, you can escalate the matter. There are several ways in which to do this. For example, you may hire the services of a specialist debt collection solicitor.

Recovering a debt owed from an overpayment of wages through court action can be expensive. As well as this, it can take a very long time to produce any kind of outcome.

Depending on the value of the debt, it may not be cost-effective to do this. A better option is to instruct a professional debt collection agency. If the case has reached this point, you will have already spent time and money attempting to recover the money.

A professional and proficient debt collection agency like Federal Management will provide a swift, professional and low-cost solution.

A reputable debt collection agency will resolve all matters amicably. This will allow you to focus on value-based activities which grow your business.

Recovering an Overpayment of Wages Appropriately

Using a debt collection agency is the best way you can recover any overpaid wages if the situation calls for it. There are many options to choose from, and finding the best debt collection agency for you requires thorough research.

Federal Management is the UK’s leading commercial debt collection agency. Since 2004, we have collected thousands of pounds worth of debt which has resulted from an overpayment of wages.

We are  regulated by the Financial Conduct Authority (FCA). This means we provide the most professional debt recovery service possible. If you have an employee who is refusing to repay money that has been overpaid to them in error, speak to one of our friendly debt collection experts now.

Common questions about an Overpayment of wages

What is an overpayment of wages?

An overpayment of wages is when an employer pays more money than they should have to an employee. This can happen due to a mistake or miscalculation in the payroll system.

What are my rights if I have overpaid a member of staff?

As an employer, you have the right to ask for the overpaid wages back from your employees – as long as it’s within a reasonable amount of time and provided that the request was not made as a disciplinary action.

How do I recover an overpayment of wages?

If you need help recovering an overpayment of wages, get in touch with Federal Management now. We provide professional debt collection services and will be able to help you quickly and efficiently.

Our team has extensive experience in recovering overpaid wages and we will work with you to ensure that the process is as stress-free as possible.

What if the person refuses to pay back an overpayment of salary?

If the person refuses to pay back an overpayment of salary, Federal Management can provide advice and guidance on the best course of action. We will work with you to ensure that any legal proceedings are taken in accordance with current legislation and regulations.

We understand that recovering an overpayment of wages from a recalcitrant employee can be a stressful process, so we’ll do all we can to support you throughout.  Get in touch now for help with your situation.

Posted on May 19, 2021