Most modern Human resources and payroll departments use modern systems and software to ensure wages paid are correct. Despite this, payroll errors still occur frequently and this can be down to a number of reasons.
It can be due to lack of updated personnel data or something as simply as the wrong hours being inputted. Very often it can be when a member of staff leaves but they have not been taken off the payroll figures yet.
Whatever the reason for an overpayment of wages, it is monies that belongs to the company. Millions of pounds in accidentally paid every year to current and former employees. This is especially prevalent in large organisations.
A recent article showed that research said only 57% of employees checked their payslips.
Tips for recovering an overpayment of wages
If a payroll team has accidentally made an error and overpaid wages, then there are immediate things that they can do. The task to recover an overpayment of wages should be done swiftly.
Firstly, when the error is spotted, immediate action should be taken. Firstly, check the employee’s contract of employment to ensure it was not due to them.
There may have been special terms within a particular employee’s contract that make allowances for additional sums to be paid such as a bonus.
If the employee is still employed by the Company, then it is not lawful to deduct money from their wages to repay this. The 1996 Employee rights Act defines what you can and cannot do in respect of an employee’s wages.
The legislation states that employees cannot have unlawful deductions take from their wages. An overpayment of wages however is not included within this.
It is always advisable that any Payroll team discusses the matter with the member of staff to come to an arrangement. Ideally, the member of staff will simply return any undue monies they have received but that is not always the case.
It should be particularly straight forward to deal with if the overpayment of wages is for a small amount.
For larger amounts, again, ideally the employee will just return the monies forthwith. If they have accidentally spent some of the money then agreed monthly repayments by way of wage deductions can help fix the situation promptly.
Overpayment of wages to ex-employee
If an overpayment of wages has been made to an ex-employee, this can prove to be a trickier exercise. Firstly, it is advisable for the business employer to reach out to the format staff member to try to engage them. Ideally, this will be a straight forward task and they will respond accordingly.
A letter advising on the situation should also be sent via recorded delivery alerting an ex-employee to the issue. This should invite them to contact their former employer to arrange a resolution.
If the individual ignores a Company’s initial attempts at dialogue, then a ‘letter before action’ could be sent. This will likely advise the ex-employee that action will be taken to recover the overpayment.
If there is no response to the letter before action, then one valid option for the Ex-Employer is to instruct a professional Debt Collection Agency or start legal proceedings.
Ex-Employee won’t pay
If the ex-employee refuses to co-operate or ignores the Company’s attempts to resolve the matter, then further action can be taken. Thousands of Businesses take Debt Recovery action every year to recoup overpayments of wages.
There are two main ways for a Business to do this. Either by instructing a Professional Debt Collection Agency or by starting legal proceedings.
Debt Collection or Legal Proceedings?
The most common method for Businesses seeking to recover an overpayment of wages is professional debt collection agencies. The old school method of legal proceedings is now viewed by most Companies as too expensive, too timely and too stressful.
The most notable debt collection solution for recovering overpaid wages is Frontline Collections. They are the famous name for Personal debt Collection in the UK and act on behalf of many large PLC’s and Small Employers alike.
A low fixed fee solution that has been used by thousands of Companies to recover overpaid wages and suchlike. Such is their reputation for delivering highly professional debt collection services; they are the Gold approved supplier to the Independent Schools Association. They also provide other specialist services such as Dental Debt Collection and Veterinary Debt Collection solutions.
Another well known name from the Debt Collection industry is the sister company to Frontline Collections. Federal Management are renowned for their Premier Commercial and Small Business Debt Collection services across the UK. They can also assist with International Debt Collection also.