repaying salary overpayment (tax & NI query)

misterbarlow

How does it work for paying back an employee overpayment regarding the tax and NI deductions.. ?

My wife started a new p/t job last year for a small business, working 20hrs a week (over 3 days), on an hourly rate, paid monthly.

Her payslip is very vague, its printed on site I think, and basically just has the usual basics, in the income side it has
'gross monthly salary £XXX.xx'
then in deductions it has 'Tax £XX.xx and NI £XX.xx'
and then at bottom has 'Net pay £XXX.xx'

She gets the same every month so we always took this as being correct.
Her boss has now come back and said they have only just realised they have been paying her for 22hrs a week not 20 since she started.
(She finishes at 3 on a friday not 5, and they had been paying her for 3 full days)
We then checked it ourselves and it appears they are right. Doh!


So they calculated whats she owes him back by taking her hourly rate x2 (hours per week overpaid) and x number weeks she has been there, and said thats how much she owes him back, I think its just shy of £500, and said they will be taking back £50 per month starting this month.

In her most recent payslip its the same format as before but the gross has obviously dropped a bit, but now underneath the tax and NI in the deductions is also 'repayment £50.00.'

So I may be wrong here but when he overpaid her all along she paid tax and NI on that full gross amount, for arguements sake lets say it was £700.

Now they are taking it back off her salary AFTER her usual deductions so she is paying tax and NI on the new lower gross of say £600, and then they are taking the £50 back from the net, surely that means she is then paying tax & NI on the money she is paying him back, and so in effect is paying tax & NI TWICE on the money she has been overpaid??
Once when she had it in error, and now again before its paid back!

Ie for example say it was £700pm, she paid tax and NI on that, but he should have been paying say £600, so they overpaid £100 per month but she already paid tax and NI on those £100's.
So now she is getting £600pm and then minus tax & NI on that, and then they are taking the £50 back from the net.
Shouldnt it be gross £600, then take the £50 back off first, and then deduct the tax and NI from the £550?

She owes him money she has already paid tax on, and then she is being taxed on her money again before repaying it to him!

Or am I totally wrong and it doesnt work like that??
It just seems to us she is paying tax on this overpayment twice?

LittleVoice

You are right to say the gross overpayment should be deducted from her pay before they deduct tax and NI - otherwise she will have paid tax and NI on money she hasn't ultimately received.

alisonmeyers

Your wife's boss/HR sound like idiots. Of course she'll be paying tax and NI twice on money she hasn't received - you are correct.

They need a proper way to manage getting the money back e.g. underpay her by 2 hrs a week until it's paid off, or deduct before tax/NI issues come into play.

There's a fair few of these types of threads going around at the moment (there was another one last week where a guy had been paid a £5k bonus overpayment, and his work were going to take back £1k a month for 5 months or some other such nonsense).

Your wife needs to raise this with her boss ASAP since they appear to have just gone ahead and started the deductions, further complicating things for no need :T