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Topic: Pay and pensions

overpayment of wages letter for ex-employee
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Overpayment of wages letter for ex-employee

Overpayment of wages letter for ex-employee

If you discover an accidental overpayment of wages after an employee has left your employment, use our letter to ask them to pay the monies back. If they refuse to repay and you’re not willing to write off the debt, your other option for recovery is to issue proceedings in the civil courts.

Deduction from wages

Occasionally, administrative or payroll errors may result in an employee being overpaid. Where the employee is still employed, recovery is relatively easy by making a deduction, or series of deductions, from their salary even without their consent (or from their final salary payment if they’re about to leave employment) - see our Overpayment of Wages Letter.

Options for recovery

However, if the overpayment can’t be recovered by making a deduction from salary because the employee has already left employment, then you have two options. The first is to attempt to recover the overpayment by simply asking the ex-employee to repay it. This is when you would use our Overpayment of Wages Letter for Ex-Employee. If that fails, you would then have to try to recover the overpayment by issuing civil proceedings.

Debt repayment

Our letter advises the ex-employee of the details of the overpayment and then states that you now wish to recover the overpaid sum. Do enclose evidence as the employee will need to clearly understand where the errors arose, so that they can accept they were indeed overpaid. It then has two alternatives for repayment, dependent on whether the total overpayment is small or a significant sum. Each case will turn on its facts as what is small is relative to the employee’s salary, so you will need to make your own reasonable assessment as to whether you class the sum as small or not. Where it is small, we have proposed that the ex-employee repay the sum in one single instalment direct into your bank account.  Where the sum is significant, we have proposed a monthly repayment schedule - and how big the monthly repayments are and for how many months they will run is for you to fairly assess. In either case, the ex-employee is asked to sign an acceptance slip to confirm their agreement to the repayment proposal. Finally, our letter warns the ex-employee that you may take legal action through the civil courts if agreement can’t be reached on recovery of the overpayment.

A compromise position

As a compromise, you may wish to consider writing off part of the overpayment to obtain the ex-employee’s agreement to repay the remainder, particularly where the sum is significant or has been discovered some time after they left your employment. Civil proceedings should be a last resort because of the time and expense involved, and therefore do take a commercial decision. Finally, bear in mind that you will only be recovering the net sum from the employee. You will already have deducted income tax and National Insurance contributions at source through your PAYE system, so any overpayment there is for you to sort out with HMRC.

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