I’ve Been Overpaid! What Should I Do?

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If your employer unintentionally overpaid you at work, then you might think that you are lucky enough. However, you should not quickly assume that you will be keeping the money. Here, we will take a look at the overpayments for employees, freelancers and sole traders.

For Employees Who Are Overpaid

In case the employer has accidentally overpaid his employee, either through his salary or in any kind of expenses, then the employer can reclaim the overpayment legally. The employer can either deduct the overpaid amount from his upcoming salary or from the amount that he will receive if he decides to leave from the company.

The employer has limitations when it comes to making deductions from the wages of his employees. However, an overpayment is one situation that is permitted by the law.

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If the employer accidentally makes an overpayment for a particular pay period, either weekly or monthly, then it should be understood that the employer is allowed to deduct it on the employee’s next salary.

However, things can get complex if the overpayment was done by the employer over a long period of time. Maybe it was a mistake on the payroll or any overpayment that was committed months ago and it was only discovered recently. During this situation, the employer must be careful in recovering the money.

Even if the employers are allowed to deduct the overpayment without the employee’s consent, they have to make some considerations in case the amount owed is large. Employers must use a reasonable approach to make sure that the employee can afford the repayments.

Organising Repayment Arrangements

If an employer discovered a huge amount of overpayment, then it is recommended that he must talk to his employee. As much as possible, the employer must be considerate enough when it comes to the repayment schedule. Perhaps the employer won’t set a time period.

In case the employee will not agree with the repayment arrangement set by the employer, then he can use the internal grievance procedure in attempting to resolve the situation. Furthermore, employees can take their employers to a Civil Court if they believed that their employers treat them unfairly and unreasonably with regards to recovering the repayment.

On the part of the employee, he will probably defend himself by saying that he was lead to believe that he has an entitlement to the money. This means that it was not his fault and as a result, they become reliant on the money. Most often, this is the same as saying that they have spent the overpayment!

On the other hand, if the employer failed to convince the employee about the repayment arrangement, then the employer can take his employee to a Civil Court in order to recover the money. At this point, it is clear that the employee and the employer do not have a good relationship anymore.

What the judge can do in both of these cases is to determine where the greater injustice is done. Whether it is on the employee for requiring him to repay the money or on the employer for not receiving the overpayment back. The judge will also consider whether the employee has made some efforts in reporting the overpayment, or what the employee did with the money, as well as if the employee received payslips for his salaries. Employees should know that it is their right to receive an itemised payslip.

Depending on the court’s decision, the employee might be asked to repay some or all of the money and consider that the employee could easily agree with the employer’s repayment arrangement. While on the part of the employer, it would be more practical if he would just write off part of the overpayment instead of spending money for the legal proceedings in order to recover the entire amount.

What if the employee has left the company who has overpaid him?

If the employee is no longer working on the company where the overpayment happened, then this is completely a different situation since the employer won’t be able to make deductions anymore. What if after leaving your job, your former employer contacts you and tells you that you owe them money because of an overpayment? What will you do? Most often, it will depend on the content of your original employment contract from your employer.

For instance, in some contracts, in case the employee still owes money from the company after he left, then this can be considered as a civil debt since it was not deducted from his final wage. However, if it is not stated on the contract that the alleged overpayment is considered as a civil debt, then the employer may find it difficult to recover the overpayment if the former employee won’t cooperate. In both of these situations, it would be advisable that the former employee will seek some advice from an organisation that provides legal support for employment matters.

For Freelancers Who Received Overpayment

It is uncommon for overpayments to occur on freelancers and sole traders. Most often, they encounter late payments. However, if their client has overpaid them then it only makes sense that they should inform their client and make repayment arrangements. This is done in order to guarantee a healthy relationship with the client so the freelancer can still obtain future work.

It is always recommended that the freelancer must prepare a contract for the work that needs to be done. It should also specify how much and when will the client pays. This can be used as a reference by both parties.

Sometimes overpayments for freelancers can be complex because it involves VAT, tax, and accountancy requirements. That is why this is something that you should consult with your own accountant.

If your client agrees, one way of dealing with overpayments is to deduct it on your future payments from the client. On your next invoice, you could consider the overpayment as a credit then you will include the previous invoice number.

But what if the overpayment occurred on the last invoice of your client? Well, you could send them a credit note and place the invoice number as a reference. It is also advisable that you should talk to your client and your own accountant if these things occur to you. They can probably help you in finding the best way to sort this out.

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