Under the Employment Rights Act 1996 (“ERA 1996”) both employers and workers have rights and responsibilities relating to the protection and payment of wages. Employers can’t make deductions from their workers’ wages or request that the worker pay them money unless authorized under contract or statute (or with the worker’s consent). However, what happens when there is an overpayment of wages? We’ll look at the issue from both a worker’s and the employer’s perspective.

Overpayment of wages – worker perspective

If you’ve been overpaid by your employer then there is unfortunately a complete bar on bringing claims for unlawful deductions where the reason for the employer’s deduction is that you’ve been overpaid. If you definitely have been overpaid and your employer is attempting to recover the difference then you may not be able to pursue a remedy through the Employment Tribunal. This is the case even if the employer has miscalculated how much the payment is (i.e. if you were overpaid £50 in January and your employer mistakenly deducts £60 from your wages in February).

However, if you do make a claim for deduction from your wages in the Employment Tribunal then the Employment Tribunal has an obligation to determine whether there was an overpayment and, if so, whether the overpayment was the reason for the deduction. If the Employment Tribunal refuses to hear your claim then you have the possibility of suing for breach of contract by your employer in the civil courts.

Overpayment of wages – employer’s perspective

If you’ve overpaid your worker in the previous month(s) then the first thing to do is accurately calculate (as much as possible) how much has been overpaid. If there has been an overpayment of wages to the worker then you are entitled to deduct the value of the overpayment from their wages in their next payslip (or payslips, depending on the amount outstanding). Workers are barred from bringing claims in the Employment Tribunal for deduction of wages where the reason for the deduction is an overpayment to the worker in previous payslip(s). However, the worker is entitled to bring a claim in the Employment Tribunal to determine whether there has in fact been an overpayment. If the Employment Tribunal finds that there was not an overpayment of wages then they will probably allow the claim for deduction of wages under the ERA 1996 to go ahead. If the Employment Tribunal finds on the facts that there was an overpayment then they are entitled to hear the case, even if the wrong amount has been “recovered” from the worker.

Conclusion

Claiming and resisting a claim for deduction of wages due to a previous overpayment rests upon whether there has in fact been an overpayment. The worker must show proof that there has been a deduction from their wages and the employer must in turn show that there was a previous overpayment.

Depending on your employment status (i.e. whether you’re a worker or an employee) you may be able to claim constructive unfair dismissal if you’ve suffered an unjustified deduction from your wages and want to resign from your employment. Depending on the circumstances you may also have been discriminated against.

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Redmans Employment Team deal with employment matters for both employers and employees, including drafting employment contracts and policies, advising employers and employees on compromise agreements, handling day-to-day HR issues, advising on restructures, and handling Employment Tribunal cases for both employers and employees

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