An overpayment of wages is more common than you may think. There are a multitude of reasons this could happen and usually when the employee is still within your employment a simple solution of taking agreed deductions from future pay packets is the easiest and causes the least impact for the employee.

However, there are always going to be occasions where an accidental overpayment is made to someone that is no longer employed by you or the company - this can be a little tricker to collect and you may see some hostility from the individual. This is where some form of legal debt recovery advice can come in handy.

Below we give some simple yet handy details on where overpayments can occur and in which situations.

You have the right to deduct money from an employees pay if:

  • The employment contract specifically allows it
  • It has been agreed in writing beforehand
  • You have overpaid them by mistake
  • It is required by law – for example Income Tax or a court order
  • They missed work to be on strike or take industrial action

For example, you can only deduct money for training costs from their final pay if it's agreed in the contract or in writing beforehand.

Make sure you are still paying the minimum wage

Your deductions must not lower someones pay below the National Minimum Wage, unless the deduction is for:

  • Tax or National Insurance
  • Something they have done which their contract says they are liable for, such as damage to a vehicle through reckless driving
  • Repayment of a loan or advance wages
  • An overpayment you made by mistake
  • Buying shares, other securities or share options in the business
  • Accommodation you are providing them – find out more about accommodation deductions on GOV.UK
  • Something they use – for example union subscriptions or pension contributions

Agree how the money is paid back

It is best to talk to the employee first and agree how the money will be paid back. For example, a deduction from wages or a bank transfer.

If needed, you can set up a payment plan to help your employee with their finances. This is especially useful if they owe a large amount or you did not realise you were making overpayments for a long time.

If you overpaid someone

You have the right to deduct money from an employees pay if you recently made a simple overpayment. Speak to them and let them know how you are going to claim it back.

If the overpayment was a long time ago, or overpayments have been going on for several weeks or months, you should:

  • Be flexible and fair claiming the money back
  • Agree a repayment plan if needed

If you cannot agree a repayment plan, you should not simply deduct money from their wages.

The law can be complicated in this area so you can speak to an Acas adviser to discuss your options.

If they no longer work for you

Contact them and explain why you think they owe you money and how much.

If they refuse to pay you back, you might be able to make a court claim for money on GOV.UK. It's a good idea to get legal advice first.