My employer says I've been overpaid - what are my rights?
Your employer must make every reasonable effort to ensure you're paid accurately. But situations can arise which result in you being overpaid and owing money to your employer. If this happens, you may feel overwhelmed or that you're being treated unfairly, so let's look at your rights and how to manage the situation if it arises.
What is an overpayment?
An overpayment is a payment from your employer that you're not entitled to. For example, if your absence isn't correctly entered on the HR system, you may continue to receive full sick pay when it should have reduced to half or zero. Another example could be that you continue to receive an allowance that you’re no longer entitled to.
Overpayments can also occur when something happens between payroll being finalised and you receiving your pay - for example, if you were absent between the close of payroll and pay day and you don't have any sick pay entitlement left, this could result in an adjustment being made the following month. Such adjustments are usually automatic.
Can my employer ask me to pay back overpayments?
Yes. It’s perfectly legal and most employers, including TSB and Lloyds Banking Group, include a clause in employment contracts which specifically states that they can make deductions when overpayments or errors have happened.
It can be distressing to hear that you owe money, especially if the overpayment has occurred over an extended period and through no fault of your own. But there are things you can do to ensure you're not left in financial difficulty. We'll talk more about that in a moment.
What to do if you're told you've been overpaid
Carefully check the details. An overpayment can be tricky to understand, especially if it relates to sick pay or if it's been happening for a long time. So, check you understand what the overpayment is, how it's been calculated, and whether it's correct. You can ask your payroll department to provide you with a written calculation.
If it’s correct, you will need to repay the sum due. If it isn’t, we’ll tell you what to do later in this article.
Your employer making an error is rarely a defence for saying you don't owe the money back.
If you understand that you must repay the amount, next you need to work out with your employer how and when to make the repayment.
For low value overpayments, the following months' pay will usually be adjusted. However, larger sums could mean you receive zero pay from your employer. For some people that might be OK, especially if you were aware of the overpayment and had kept the overpayment separate to your day-to-day finances. But if you're being asked to pay a larger figure back that would cause you financial difficulty, you can ask to make repayments in the form of a repayment plan. This is usually over a period of a couple of months, but in extreme circumstances can be over a longer period.
If you need any assistance, talk to your local Accord officer and we'll guide you through the process.
What to do if you think you've been overpaid
It's important that you check your pay every month. Doing so helps spot mistakes. If you spot a mistake, or think you've received something that you shouldn't have, then we'd recommend doing the following:
- Check with payroll and run your understanding by them. Payroll can tell you what they were instructed to pay you, but they may not be able to tell you why. They will only have the information that has been supplied to them.
- Talk to your manager about your concern. If they agree that something's not right, they will raise this with payroll or HR and take action to correct it.We'd recommend getting things clarified in writing where possible. It might sound unnecessary, but if an issue were to persist for a lengthy period or you're told that your pay is correct and then later you're told you were in fact overpaid, you'll want to show that you did everything possible to resolve the issue.
- We'd recommend getting things clarified in writing where possible. It might sound unnecessary, but if an issue persists for a lengthy period or you're told that your pay is correct and then later you're told you were in fact overpaid, you'll want to show that you did everything possible to resolve the issue.
How to prevent overpayments?
Remember to check your pay every month. It's your responsibility, as well as your employer’s, to identify when you've been paid incorrectly.
From a financial wellbeing perspective, it also helps you to plan your finances, manage your budgets and recognise when things aren't right.
Appealing against requests to pay back overpayments
As we mentioned earlier in this article, you may feel the request for repayment is unfair or that you disagree that an overpayment has occurred. There may be situations when you can challenge this:
- You believe the money paid to you was your own and not an overpayment. For example, you were told or have it in writing that your pay would increase, and therefore were satisfied it was correct when you received it.
- You acted in good faith and without knowing that you may have been in receipt of an overpayment, and you couldn't have foreseen that your employer would ask for it to be paid back.
- You were not involved in causing the overpayment. You can be involved in being the cause of overpayments if you realised there was an issue, or you should have known there was an issue, but did nothing about it and continued to receive and spend the overpayment. It won't be a winning argument to simply tell your employer that you didn't notice because you don't look at your payslip.
If you believe a request for overpayment may meet the criteria above, you can ask your employer to review the overpayment. As an example, if you've done all you could to prevent an overpayment, but your employer continued to pay you incorrectly, they may be willing to agree a reduced repayment figure in recognition of their error and your efforts to resolve it.
We'd recommend chatting to your local Accord officer to help you resolve the situation.
(Note: If you've not received an overpayment, and your employer withholds part or all your pay or benefits, this could be an unlawful deduction of wages. In this case, talk to your local Accord officer to discuss your situation.)