bonus overpayment

didmiller

My bonus was overpaid by £5000, the employer didn't notice this until I flagged it up to them. I am happy to repay the amount but I am wondering how much I need to repay. The amount I would have received after tax would probably be just under £3000, the employer is asking me to pay back £1000 a month for the next 5 months. This seems like too much money and does not appear to take into account tax,NI, pension etc. How should the money be repaid?

gingerpuss

The £5,000, if it was a gross payment, was paid to you pre-tax, ie before tax and NI was deducted. To recover the £5,000 from you without you ending up paying the tax and NI twice (which you would be doing if you repaid £5,000 from your net earnings) is to have your employer deduct the installments from your gross pay as a pre-tax deduction. For example, if your gross earnings next month are £2,500, your employer should deduct £1,000 from the gross leaving you with £1,500 to be taxed. This is the correct procedure for clawing back overpaid gross wages. This if course may already be what your employer has planned, but double-check. Just ask them to ensure they deduct the £1,000 as a gross payment pre-tax. I am a payroll manager with an NVQ in payroll and I work in an accountants doing payroll every day. It's quite a common issue.

The answer to the question of how much you need to repay each month? Well, as the initial error was on the part of your employer, you can actually choose how to repay. Your employer cannot force you to pay back more than you can afford each month. Remember, employers cannot deduct anything from your wages without your prior agreement. This is classed as "unlawful deduction from wages". Hope you get it sorted soon

Savvy_Sue

gingerpuss wrote: »

The answer to the question of how much you need to repay each month? Well, as the initial error was on the part of your employer, you can actually choose how to repay. Your employer cannot force you to pay back more than you can afford each month.

Yes, but in this case the employer knows that the employee knows there were overpaid, because the employee told them!

So presumably the employee had the wit not to spend the extra £5000 (or whatever they were left with after tax etc!)

Therefore surely the employer could ask for it all back in one lump sum?

gingerpuss

If it was myself being overpaid and noticed it straight away, I agree I'd rather pay it all back at once off my next wage to get it cleared. The thing is though, if your next gross wage is less than £5,000 they can't deduct £5,000 from that as you would have a negative gross pay. It needs to be deducted through the payroll system to keep your gross pay to date, tax and NI correct.

ohreally

You need to reach agreement on the net sum to be repaid before negotiating the mechanics of how this will be returned.

In addition to statutory deductions, are there pension contributions to factor in as well?

DVardysShadow

ohreally wrote: »

You need to reach agreement on the net sum to be repaid before negotiating the mechanics of how this will be returned.

In addition to statutory deductions, are there pension contributions to factor in as well?

Bonuses are generally not pensionable.

I see no need for an agreement on the net sum if the mechanics are that the £5000 gross [un]pensionable overpayment is deducted from gross [un]pensionable salary. All that is needed is an agreement of a schedule for deductions.