Overpayment of Wages Briefing
This briefing aims to provide some basic information on
the overpayment of wages. It also highlights if an employer can force the repayment
of overpaid wages- paid to an employee- back to the employer. It is important
to remember that this subject can differ quite considerably amongst members. This
is a subject that UNISON representatives and members will face on a regular basis.
is the Overpayment of Wages?
Employees' finding that their
payslip shows that their wages seem a bit higher than normal can find themselves
in a difficult situation. Many people believe that an overpayment is legally theirs,
but they can be in for a nasty shock.
can only make deductions from an employee's wages in limited circumstances. They
can deduct tax and National Insurance (NI). They can make other deductions if
they have previously received the employees consent in writing.
an exemption to the rule that a deduction should be made is where there has been
an overpayment of wages.
What Counts as Wages?
considering whether an employer can make a deduction from an employee's wage,
the following all count as wages:
Pay including fees, bonuses commission and expenses.
- Payments ordered by an employment
tribunal, such as payment of wages between an employee being dismissed and being
given their job back.
- Payment, which
have to be made by law instead of wages, such as guarantee payments when the employee
takes time off to do union work or work for a job if they are to be made redundant.
maternity pay, statutory paternity pay and statutory adoption pay.
an Employer Force the Overpayment of Wages?
By law, an employer is only
entitled to make certain deductions from an employee's pay. If the employer does
not pay the employee at all, this counts as a 100% deduction.
are rules about what counts as pay for the purposes of when the employer can make
deductions. In most cases, an employer can only lawfully make a deduction from
an employee's pay if the deduction is: -
to be made by law. For example, employers are required to deduct tax and National
Insurance from their employees' pay.
by the employee's contract. This means that there must be a specific clause in
the contract, which allows for that particular deduction to be made. The deduction
can then only be made lawfully if the employee is given a written copy of the
term in the contract before any deduction is made under it. This would cover deductions
such as union dues or payments to a pension scheme.
employee has agreed to the deduction in writing before the deduction can be made.
there are particular deductions, which an employer can make which do not have
to fit into the catorgies listed above. These deductions are: -
deduction due to the worker having been genuinely overpaid.
- A deduction made because the employee took part in industrial
- A deduction made by an employer under a court
order or an order from an employment tribunal, such as an attachment of earnings
order (commonly know here in Scotland as an earnings arrestment).
consent to deductions from wages.
An employer might ask a worker to agree
to a change in the terms of his or her contract or to give his or her consent
to allow for deductions to be made on account of certain conduct. However, if
the employer makes a deduction in respect of any instances of such conduct that
took place before the contract was varied or the consent obtained, this remains
unlawful. The same principal applies to payments by workers to employers.
example of this would be, when an employer might obtain a worker's consent to
allow for deductions to be made on account of lateness. The employer would then
be entitled to make deductions on account of any future incidents of lateness,
but would not be entitled to make reductions on account of any such incidents
that occurred before the worker's consent was obtained.
Paying back overpaid wages.
In general, overpayments are
recoverable by an employer regardless of the circumstances in which the overpayment
arose. However, if an employer incorrectly calculates the amount of pay due, resulting
in an overpayment, then there are policy guides which should influence the employers
decision on whether to recover the money or not. If the overpayment is to be repaid,
the employer will be expected to act reasonably. Notice should be given of the
recovery and deductions should be staged over a period of time.
This briefing is primarily for information
purposes on the Overpayment of Wages. Branches should be aware that this would
differ across workplaces and individuals concerned.
Rights Act 1996
of Trade and Industry
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