employee overpaid in error

apples1

We run a small business and have just realised that an employee has been overpaid by £100 per month gross (he earns about £1500 gross per month) for part time work with us. (He has another part time job elsewhere too).

It seems this has been going on for almost two years and stems back to when he reduced his hours with us to do an extra two days at the other job. We use a payroll company to do our payroll and the pro-rated amount of his salary was done incorrectly.

Are we legally allowed to claim this money back? If so would most companies do so?. We are incredibly tight financially and to be honest if I could afford to let it go I would but we are not in a position to gift it.

whitewing

I would but over at least the same period and maybe even at £50 a month, with the obvious condition that if he leaves earlier than that any remaining balance gets paid back.

I think you need to check out the legal situation (maybe with a legal helpline if you have one with your business insurance).

I think you need to provide a written explanation but explain it in person, along with your solution. You may also need to be a little flexible on the solution - e.g. you may say £100 per month, he may want less than that as it is your mistake.

What would you do if he refuses to pay it back and resigns? You need to think through a number of situations.

Whatever happens, I don't think you can rely on having a lump sum back soon.

apples1

I am more than willing to do it over a period of time. He leaves in three months however which is why I feel a bit stuck as I cant really offer to do it over a year which is what i would have done.

Takeaway_Addict

apples1 wrote: »

I am more than willing to do it over a period of time. He leaves in three months however which is why I feel a bit stuck as I cant really offer to do it over a year which is what i would have done.

If he is leaving and you can prove that he definitely owes the money then for sure....

If you had short changed him do you not think he would be asking for back pay?

ohreally

apples1 wrote: »

We use a payroll company to do our payroll and the pro-rated amount of his salary was done incorrectly

This is where you may need to turn.
Bear in mind they should have PI insurance and it appears to have been their mistake anyway.

Takeaway_Addict wrote: »

If you had short changed him do you not think he would be asking for back pay?

The employee has done nothing wrong and may not even have been aware of the situation.

apples1

Takeaway_Addict wrote: »

If he is leaving and you can prove that he definitely owes the money then for sure....

If you had short changed him do you not think he would be asking for back pay?

There is no doubt we overpaid. It is just the fact the the error sits with us (and not him) that made me want to be sure I am being fair on both sides. He is a reasonable chap but yes would have been after every penny of back pay if it were the other way round.

We do use a payroll company but the responsibility sits with us to check the payslips before we give the go ahead to send the money each month. I checked the overtime and sickness etc for each of the staff but failed to check that the pro rating of his basic pay had been done correctly at the time he cut his hours. It is the basic pay that was wrong and that has stayed the same each month since.

whitewing

Has he actually handed in his notice?

Do you think he is definitely aware of the situation?

If he is going anyway, I would be tempted to ignore it and write it off, rather than have the hassle. Because I think it will be hassle if he is going.

Alternately, will he require a reference from you in the future? If so, that may be a lever for a mutually acceptable solution.

apples1

He has handed in his notice. He agrees it has been overpaid. I didn't take it further this afternoon as I didn't know what the correct thing to do was.

whitewing

Talk through your options with a legal helpline or solicitor, if he now knows he has been overpaid, then he should expect to have to pay it back. Get something drawn up for repayment in installments interest free. If he defaults then you will need to take action.

Do you think he realised before now or not? If not, again, after taking legal advice, maybe backdating a payrise and letting it go would be a simple and confidential solution but I guess that would depend on whether it may be seen to set a precedent. Would you have to fork out extra for tax on it?

getmore4less

Why was this not all detailed in the written change of contract notification?

One thing will be how obvious would it have been to the employee.

They have a responsibility to check their pay and notify of any obvious mistakes.

If there is a history of them being picky then you can reasonably assume they knew and kept quiet.

I think there have been cases where the employer had to forgoe the repayment because it was deemed non obvious to the employee

Takeaway_Addict

ohreally wrote: »

This is where you may need to turn.
Bear in mind they should have PI insurance and it appears to have been their mistake anyway.



The employee has done nothing wrong and may not even have been aware of the situation.

That maybe true but again, if it was the other way the employee would be asking for the back pay, even if the company didn't realise.