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Salary sacrifice not applied correctly, now my employer wants overpayment back

57 replies

StetsonsAreCool · 17/09/2014 20:49

Hope someone can help me figure this out... Sorry, it's a bit long.

In 2012 I entered a Salary Sacrifice agreement for Childcare Vouchers with my (then) new employer. Since the first month, the 'salary' part of my pay slip remained unchanged, but 'Childcare Voucher' appeared in the deduction column. I've never thought much about it, just thought it was how it was administered there.

Today, the payroll company used by my employer has dropped a bombshell on the Finance Director to say that due to an error on their part, the employees that receive childcare vouchers have been overpaid. Apparently the error only applies as far back as April 2014. But the structure of my pay slips hasn't changed - apart from tax code changes and pay rise adjustments.

A quick go on Mr Anchovy shows me that, because they've administered the voucher as a deduction after tax rather than a reduction in my net salary, I have indeed been overpaid. It works out at about £150 a month by my calculations.

The payroll company wanted to recoup the overpayment in one go in September (bye bye £800, more than half of my gross monthly salary). The FD said she wasn't happy with taking the overpayment back in one go and that they'd split it over 12 monthly installments.

Problem is, I'm going on Maternity Leave in December for 9 months. I don't think they can deduct the overpayments from SMP (no additional company maternity pay) can they? So when the hell am I supposed to pay this back?

It's completely the payroll company's fault, and I'm feeling pretty resentful at me being the one to have to stump up the cash to fix it - even though logically I know it's not my cash because it was paid in error, it's still annoying because they shouldn't have got it wrong in the first place!

Has anyone got any advice about the technicalities of repaying overpaid salary? I'd like to go back tomorrow armed with a bit more information, as although I'll be talking directly to the payroll company tomorrow I don't really trust them to get their facts right now if they've already got it so wrong...

OP posts:
fanjobiscuits · 17/09/2014 20:55

How horrible. Not sure of the legalities but can you threaten to go to the press for some leverage? Will you get tax, ni etc back ok? How will the company reassure you they are right this time?

StetsonsAreCool · 17/09/2014 21:02

Not sure if that's really what I want. I'm confident it was a mistake, I'm not interested in involving outside parties.

Not sure about tax, NI etc - I've got to ask them in the morning. The net amount I owe is £1200, but they worked out the gross amount (taking into account tax/NI deductions) as just over £800 - around £70 per month over 12 months.

But I'm not there for the whole of the next 12 months.

Would this have an effect on my SMP calculations? I'm 27 weeks this week - the qualifying period has passed. Will they work out the SMP based on what I was actually paid, or what I should have been paid? Better be the first Smile

I think the only way I'll be reassured is if I get matching advice on here, from anyone who knows about this sort of thing.

Anyone? I have biscuits and flowers, and a VAT of gin that I can't touch for a while Smile

OP posts:
maggiethemagpie · 17/09/2014 21:11

Phone maternity action, they're good at this kind of thing. They are only open certain days so check out their website and give em a call.

CharlieSierra · 17/09/2014 21:24

Not what you are asking but do you know you are entitled to continue to receive your childcare vouchers throughout your ml even if you have no salary to sacrifice? Your employer may not tell you this unless you raise it.

StetsonsAreCool · 17/09/2014 21:31

It's alright, it's already come up and the payroll company have said that I will continue to receive them.

There's a tiny part of me that thinks that it's this that has led to them noticing the mistake in how the voucher and salary sacrifice has been administered across the board...

OP posts:
StetsonsAreCool · 17/09/2014 21:35

And thank you Maggie, they're open tomorrow afternoon so I'll call them if I don't get a resolution tomorrow morning.

OP posts:
Iggly · 17/09/2014 21:44

I'm slightly confused - they took childcare vouchers out of your net salary instead of gross?

What should happen is your gross salary is reduced by the childcare voucher

So how have you been overpaid? You got more childcare vouchers than you should have? If the vouchers were shown as a deduction on your payslip then your monthly net position was lower than it would have been had you had no childcare vouchers? I'm so very confused!

StetsonsAreCool · 17/09/2014 21:50

I've spent most of this afternoon very confused too Smile

Net and gross pay do tend to trip me up a bit, so apologies if I add more confusion.

They haven't reduced my salary, they've deducted the cost of the voucher after tax. If they had have reduced my net salary, my gross pay would actually work out at £150 less per month. As it stands, by taking it as a deduction instead of applying the sal. sacrifice, I've ended up better off. I'm not sure why, but the figures are correct Confused

OP posts:
StetsonsAreCool · 17/09/2014 22:03

Or am I missing something?? I thought I was meant to be better off doing salary sacrifice, but these figures show the opposite. They've said they've made a cock-up, and I agree. But I can't work out what the cock-up is, and I'm pissed off that I'm now landed with a massive repayment without really understanding why!

Is there anyone who can try and help me understand why?

OP posts:
hollie84 · 17/09/2014 22:07

Childcare vouchers are supposed to come out of your gross salary - so if you get paid £1000 a month, £243 childcare voucher comes out of it and then only the remaining £757 is taxed.

rallytog1 · 17/09/2014 22:11

I'm confused too. If they took off your tax, then deducted the vouchers, you would be worse off, not better off. Are you sure it's not them who owe you?

lougle · 17/09/2014 22:26

That's all wrong!

Childcare vouchers are salary sacrifice because you are exchanging a portion of your gross salary for vouchers.

Let's keep numbers simple and pretend you don't pay NI and only pay 10% tax:

Gross wages: £1000
Tax (10%): £100
Total pay: £900
If you then paid £100 for childcare vouchers, you'd end up with £800 cash and £100 vouchers.

Now look:
Gross pay £1000
Childcare vouchers: £100
Total gross pay: £900
Tax: £90
You'd end up with £810 cash and £100 vouchers.

Either way, however they've got it wrong, you couldn't be better off from it. Confused

lougle · 17/09/2014 22:28

If they've been deducting it from your net salary, you've been underpaid. The implication for them is that they haven't benefited from their perk in the SS scheme, which is that they don't get the NI relief on the voucher value.

Elmersnewfriend · 17/09/2014 22:31

Are you saying that they put a line saying "Childcare vouchers" on your payslip, and gave you the vouchers, but the net salary you received never changed from before you were getting the vouchers to when you did get them? That's the only way I can see that you'd have been "overpaid".

(And if that's the case - didn't you think that was a bit strange?!!!)

StetsonsAreCool · 17/09/2014 22:42

Oh, hang on. They're taking the deductions from my total (salary + non-taxable pay). When I worked out the salary sacrifice figures, I didn't include the non-taxable pay in my calculations.

I'm about as anonymous as I'm likely to get, so I'll post the figures (rounded).

Salary £23k.

Excluding any vouchers for the moment: Monthly salary is £1900. Deductions are PAYE (£220), NI (£150), Student Loan (£46), Pension (£30). Net Pay is £1482.

With vouchers: Monthly Salary is £1900, plus non taxable pay of £243, total pay = £2173.
Deductions are PAYE (220), PAYE (150), Student Loan (46), Pension (30), Voucher (243). Total deductions of £690.
Net Pay is £1482.

With Salary Sacrifice: Monthly Salary is £1,687
Deductions are PAYE (170), NI (125), Student Loan (25), Pension (30) = £350
Net Pay is £1337.

But if I add the non-taxable pay, Net Pay is £1580.

So I should be £100 better off than I am at the moment? Is that right? I've completely lost the plot now!

So why do they think they've overpaid me? Confused Confused Confused

OP posts:
StetsonsAreCool · 17/09/2014 22:44

Sorry, should explain - the second example is what shows on my payslip at the moment.

OP posts:
hollie84 · 17/09/2014 22:50

So they are adding the vouchers, and then deducting them?

RedKites · 17/09/2014 22:53

So at the moment they are giving you net pay of 1482 a month, plus 243 of childcare vouchers on top? i.e. you are getting the childcare vouchers in addition to the salary you would have been getting if you weren't getting them? But I think your third calculation shows you should be getting 1337 a month plus 243 in vouchers - so in total it is worth more to you than if you weren't having the vouchers, but the net pay is less?

lougle · 17/09/2014 23:01

Ah right. So they've entered the childcare voucher total as an additional pay amount, then deducted it in the deductions column, giving a net cost to you of £0 for the vouchers, rather than reducing your gross pay by the £243 and going from there.

It's all a bit of a mess. Firstly, they've not been charging you for £243 of vouchers each month. However, on the same note, they've been over charging you £50 tax and £25 NI (roughly) and you've been over paying student loans because your gross pay is higher.

Elmersnewfriend · 17/09/2014 23:02

What net pay are you actually getting in your bank account each month? £1482 or the lower amount?

StetsonsAreCool · 17/09/2014 23:02

Hollie, yes.

RedKites, they're taking the deduction from my total pay, which is my salary plus voucher (£2173). So the overall effect is that the voucher and the deduction cancel each other out. In essence, it seems like there's no point in me being in the voucher scheme. I'm no better or worse off - whether I receive the voucher and 'pay them back' (which isn't what I signed the sacrifice agreement for), or don't receive the voucher and don't pay them back, my overall pay £1482.

OP posts:
poocatcherchampion · 17/09/2014 23:03

no idea about the ££ side of things but I'd be asking for repayments to stop from the start of my mat leave until the end. if its not your right then they should do it as a goodwill gesture.

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Elmersnewfriend · 17/09/2014 23:07

Sorry read your next post. Assume it is the £1482. But if this has only been going on since April, didn't you suddenly get an extra c. £150 a month?

Just wondering how hard you should push all this... If it's been going on longer than April I mean.

Elmersnewfriend · 17/09/2014 23:08

Ok yes your net pay has stayed the same but you are also getting £243 of vouchers a month.

I am getting the impression the communication from your company re sal sacrifice has not been very good !

hollie84 · 17/09/2014 23:16

Stetsons - so at the moment you are getting your salary plus the voucher, is that right? Instead of the voucher coming out of your salary?

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