Inteerst on Underpayment of Salary

deadmansshoes

Hi,

I am currently involved in a claim against my employer for underpayment of salary. Essentially I am owed circa 6k per year over a six year period (500 pounds underpayment per month gross). I understand (I think!) that interest is paid at 8% as this is classed as a civil debt. Can somebody help me out with a calculation on the sort of interest to expect. There seems to be some conflicting advice on when the interest begins to be accrued. I have read articles that suggest that interest starts half way through the claim period but other suggest that it is accrued from day 1. I also understand that the tax and NI should be paid at the rate at which it should have been paid had I been paid correctly, not on a 'lump sum' awarded. If this is the case, the majority would be at 20% with a little creeping in to 40% as I currently earn around 37k per annum. Is this correct? Many thanks in advance!

Undervalued

deadmansshoes wrote: »

Hi,

I am currently involved in a claim against my employer for underpayment of salary. Essentially I am owed circa 6k per year over a six year period (500 pounds underpayment per month gross). I understand (I think!) that interest is paid at 8% as this is classed as a civil debt. Can somebody help me out with a calculation on the sort of interest to expect. There seems to be some conflicting advice on when the interest begins to be accrued. I have read articles that suggest that interest starts half way through the claim period but other suggest that it is accrued from day 1. I also understand that the tax and NI should be paid at the rate at which it should have been paid had I been paid correctly, not on a 'lump sum' awarded. If this is the case, the majority would be at 20% with a little creeping in to 40% as I currently earn around 37k per annum. Is this correct? Many thanks in advance!

Has your employer agreed that they owe you the money or is that still in dispute?

The 8% interest you mention would normally only apply if you have taken them to court and won. It would then go back to when you first made them aware of the debt which they then chose to fight. It would be simple interest, not compounded.

Assuming it has not reached this point, but the shortfall was entirely their fault, then the principle is that you are seeking to be put back in the position that you should have been in had they not made the mistake. Arguably you are due some interest on the money but that would be a matter for negotiation. If you took this point to court you would have been expected to have taken all reasonable steps to mitigate your losses. For example using savings rather than running up a credit card debt if possible.

Also, you also have a duty to check that your wages are correct, not just your employer. If this has been going on for six years why has it only just come to light?

Regarding tax, if they pay you the extra via payroll then you will almost certainly be taxed at the higher rate and have to claim it back from HMRC. Maybe somebody who knows more about payroll can help on this point.

deadmansshoes

Regarding the points above. Papers have been served on my employer and it is likely that they will settle prior to this going to court. Essentially, a test case has been brought and has now been concluded in favour of the claimant. It proceeded as far as possible before being refused at the Court of Appeal. I am in the same position as the claimant and as such I expect that I will be offered a settlement. As it is an unpaid debt I can only go back six years, hence the six years worth of claim. Just so I am clear, you believe the interest is only paid from the date that my employer became aware, via my solicitor, that I was claiming? Surely this cannot be correct.

Stevie_Palimo

I believe when making a Court challenge and if I am wrong then forgive me here but you can claim interest from the point of submitting the claim ie:- £30.000 owed to you here and you make a claim in January and the case comes up at what ever date there after would be as follows.

Interest at ?% , Cannot remember off hand but on a case I made I think I claimed around 8% per anum so £30k x 8% = £2400.00 divided by 352 = £6.82 per day.

Tiddlywinks

deadmansshoes wrote: »

Regarding the points above. Papers have been served on my employer and it is likely that they will settle prior to this going to court. Essentially, a test case has been brought and has now been concluded in favour of the claimant. It proceeded as far as possible before being refused at the Court of Appeal. I am in the same position as the claimant and as such I expect that I will be offered a settlement. As it is an unpaid debt I can only go back six years, hence the six years worth of claim. Just so I am clear, you believe the interest is only paid from the date that my employer became aware, via my solicitor, that I was claiming? Surely this cannot be correct.

Why not just ask your solicitor?

You are going to get various opinions here and you won't know which are correct - you're already questioning the first answer someone has provided.

Use your professional legal representative - that's what s/he is there for.

deadmansshoes

Thanks for your reply. Just so I am clear on what you are saying;
Employer was served papers on 24th December 2015. Amount of claim 36000.
36000 x 8% = 2880.
2880/365 equals 7.89 per day.
7.89 paid per day from 24th December until they settle up?

Thanks again!

Undervalued

deadmansshoes wrote: »

Just so I am clear, you believe the interest is only paid from the date that my employer became aware, via my solicitor, that I was claiming? Surely this cannot be correct.

Do check with your solicitor but yes, that is my understanding.

As I said you too have a duty to check that you are being paid correctly each month. Unless there are some compelling reasons why you could not have known earlier and it was entirely your employers fault then I think you will struggle.

Also, what are your ACTUAL losses? Are you 8% out of pocket or would you have "put it in the post office" at 1.5%?

Undervalued

deadmansshoes wrote: »

Thanks for your reply. Just so I am clear on what you are saying;
Employer was served papers on 24th December 2015. Amount of claim 36000.
36000 x 8% = 2880.
2880/365 equals 7.89 per day.
7.89 paid per day from 24th December until they settle up?

Thanks again!

Basically yes but this really is a question for your solicitor.

As I said you MAY also have a claim for your actual losses before this date but that would not simply be statutory interest at 8%.

Guest101

Ye I'm confused how you might've missed out on £500 a month for so long and not done something earlier?

Stevie_Palimo

Guest101 wrote: »

Ye I'm confused how you might've missed out on £500 a month for so long and not done something earlier?

They may have been paid several thousand a month and £500 was unnoticed or failing this the rate of pay may have been not listed correctly that could have also caused a large deficit in the rates being discussed.

deadmansshoes

1. I wish it was a case of being paid thousands a month! Basically it is a case of unpaid overtime. Somebody took the employer to court regarding the fact we often worked unpaid out of hours in certain circumstances. The court case took two and a half years and was finally concluded at the end of last year after various court hearings and appeals. This has made the flood gates open for others in my position.

2. The fact that it was never challenged before this point is because it was always the case that we believed that the work carried out was part of the conditions of employment. It was only when it was challenged that it was found to be unlawful. 6 years is the longest by law that a claim can go back.

3.It is classed as an unpaid debt and as such it is subject to 8% interest and not just the 1% I would have got in a post office.

4. The solicitor is not in the office this week and I will broach the subject of interest with him upon his return. I just thought I would run it by the forums first. Thanks again