Thread: Overpayment of wages by firm

Hello mudds,
Welcome to CAG I see you've looked at the other threads regarding overpayment of salary, so you will realise that your employer can request repayment.
There are some members with HR expertise who may could offer assistance, such as elche, sidewinder or ell-enn can I suggest you sent them a PM with a link to your thread.

Hi Mudds,

I would say that you first course of action is to ask your employer to put any demand for payment in writing with precise calculations to get to the figure that they are asking for.

If you still do not agree with the figures you can then dispute the calculations. Gross v Net as you say.

If I had to deduct this amount from someone on my payrolls, I would make a PRE TAX GROSS deduction which while in your case would not be exact due to the change of Tax Year, would be the fairest way to still repay the money.

This method would work as you would only repay the resulting net figures based on a monthly or weekly deduction, and from the employers point of view would reduce thier Class 1 Employers NI liability which this has also cost them.

In your post you never stated if the £9700 was gross or net ?

Hope this helps

Beau

Hi Mudds,

Yes, my explanation is saying the same thing as your solicitor but in a different way. The Gross figure is the amount you would be deducted but when you take into account the changes that would be calculated by a Payroll software Program you would be left with an actual net figure being given back to the company.

So in simple terms your Payslip will show a deduction of say £100.00 per Week/Month but in reality you will actually only be paying back £80.00 after adjustments for Income Tax & NI

So you will pay back £9700 Gross (Pre Tax) or another way £6757 Net (Cash)

You can usually post a link by copy & paste from your file your browser.

Beau

Originally Posted by mudds

Hi Beaubrummie , and again thank you .


I am totally confused now , in a yes or no situation.

£9700 is gross

£6575 is net.


Should I only pay back the net amount because i have already paid tax, N.I. and pension payments.

This would obviosly reduce the term of payback by a lot.

Thanks and apologies for being this dim about it all.
Mudds

Yes you will only pay back the net amount but I am just trying to show how it might be done on your payslip. From the employers point of view (and I appreciate that it was not your fault) your overpayment has cost them their employers NI on the £9700 which is around £600-700.

So if they deduct as a gross payment they will also regain that money.

If your employer made a straight forward cash deduction then they would not recoup the NI they have paid, and you would end up overpaying your Income Tax, hence they are asking for the Gross amount.

Beau

Originally Posted by mudds

Thanks beau.

So instead of paying say £100 for 97 months ( 9700 )
I will be paying £100 for 67 months ( 6700) @ ?


Is that correct?



Thanks Mudds.

You are half way there, lets take the actual figures you have quoted :

£9700 over 48 months = £202 per month Gross Deduction from your regular hours you now work

The net effect in cash will be a deduction of say £6757 over 48 months = £141 give or take a few pence

So on that basis you would lose £141 per month cash in your pocket while paying back £202 per month to your employer

Beau

Beau that is brilliant and I understand it . I will take that model when I go to negotiate a payback , I may have to work extra shifts as well or instead of a monthly payment now , but that has lifted my spirits for the moment . They have not taken the time ( I really do not think they posesss the intelligence) to explain that to me .

I thank you.

Mudds

I work for a company that (without trying to be big headed)

a) would have spotted such an over payment within 1 or 2 month via their monthly management accounts.

and

b) would have sacked there Payroll and HR Administrator (me) having spotted it!!!.

So no in short, I have not had to deal with such a large overpayment but if I did I would probably look for proof that either the Company or Employee was in the wrong.

Then based on those findings and legal views I would be looking to recover all of the money at a rate that was acceptable to both parties.

Beau

Originally Posted by BeauBrummie

You are half way there, lets take the actual figures you have quoted :

£9700 over 48 months = £202 per month Gross Deduction from your regular hours you now work

The net effect in cash will be a deduction of say £6757 over 48 months = £141 give or take a few pence

So on that basis you would lose £141 per month cash in your pocket while paying back £202 per month to your employer

Beau

Brilliantly explained Beau I was just wondering how to put it across and you've done it much better than I could!

Originally Posted by BeauBrummie

a) would have spotted such an over payment within 1 or 2 month via their monthly management accounts.

Same here Beau...

WAIT

There is an argument, that where a over payment has been made, which was accepted in good faith, over a long period of time that has led to the employee changing their position (e.g. by buying a new car like you did), then there is a possibility that you could defeat your employer's attempt to re-claim the money.

Allow me to explain with the following quotation:

For an example of such a common law action, see Avon County Council v Howlett , CA (employee defeating employer's claim for repayment of overpaid wages, on the basis of estoppel since the employee had innocently spent some of the money); however, the reasoning behind this decision (though not necessarily its result) was later queried in the House of Lords in Lipkin Gorman v Karpnale Ltd [1991] 3 WLR 10, HL where Lord Goff stated that such cases should be dealt with, not on the basis of estoppel, but rather on the basis of a general defence of change of position in the law of restitution, a defence which will have to be developed fully on a case-by-case basis. However, severe doubt was cast on the above interpretation of sub-s (1) (ie that the deduction must be lawful on general principles first, if this exclusion is to be relied upon) by the decision of the EAT in Sunderland Polytechnic v Evans , [1993] ICR 392 (a case under sub-s (5), below) in which Wood P stated that the subsection should be applied as it stands, and that some of the reasoning in Home Office v Ayres may no longer stand. The latter approach was applied directly to sub-s (1) by the EAT in SIP (Industrial Products) Ltd v Swinn . The point awaits final resolution by a higher court, but in the meantime the later approach (in Evans and Swinn) should probably be followed. This can be seen in Gill v Ford Motor Co Ltd , EAT but the additional point was made (under both sub-s (1) and sub-s (5)) that there is middle ground, in that a tribunal may have to consider on the evidence whether the relevant ground of exemption actually existed, ie it is not enough that the employer merely asserts that it does; this does not offend the principle in Evans and Swinn.

As you can see the law is not precise in this area. However, it is not a route you should go down without thinking about the impact on your relationship with your employer and the possibility of court costs being awarded if you lost - the amount is outside small claims limit.

However, the converse is also true for your employer, and there is a possibility that action could be taken in ET, and therefore costs awards would be unlikely.

I personally think the advice from your solicitor, as you tell it, is simplistic.

Che

Thank you all for your time and learned advice.


Che , what would you do if faced with my predicament .

What would you express to fight your own side?


Any other comments are welcomed.


Mudds

What is ET . Thanks

To a certain extent it depends on your personal circumstances, e.g. how much you need the job and how much you can afford to gamble on litigation.

But it would appear that you have the basic elements of the defence:

1) Payment received in good faith
2) Over a period of time
3) Acted upon to change your position i.e the car.

As soon as the first deduction is made, you could bring a claim in an ET that it is unlawful on this basis - but only if you have the stomach for the fight!

Che

ET = Employment Tribunal

Just wondering if you ever put your concerns regarding your pay in writing and/or if there is anyone else who would be prepared to state that you did indeed raise this matter with the company?