Overpayment

[AngelEyes46]

Any payroll people out there that can help with an overpayment? Colleague has been told that there is a possibility that he may have been overpaid in the sum of 20K over a period 4 years. He is leaving company at end of month so can't be deducted from wages. Like a lot of us, what comes in, goes out so has not got any money tucked away. Assuming that it is an overpayment, is there a minimum amount that can be paid? how does it work, i.e. from his bank account and how is tax and ni calculated as he would have been paying 40% tax on some of this additional money?

He shouldn't do anything until it's definitely proven that he owes this money. If it was received in good faith and he had no reason to suspect it wasn't his money, any ethical employer should really just write off the loss.

If he exhausts the possibilities forgetting it forgiven and finds he does have to pay it back, he should only pay back what he received after tax and NI unless that can be successfully reclaimed - the employer was responsible for sending too much money to HMRC so it's very much not his responsibility to cover that loss for them. And they should agree a repays schedule which doesn't place him in financial hardship because all this is not his fault.

But hopefully the company will see sense and not go down that road. What kind of mistake could happen to have someone paid £5k per year too much??

You'd be surprised the errors that happen in payroll! Hopefully it'll be written off but agree with the pp it is up to the employer to accurately undo the error and therefore calculate the net repayment, not gross. Undoing it over four years is a lot of work, I hope they at least write some of it off.

Are they sure?Seems odd that someone nor a super - high earner (which he isn't if he's at the 40% tax border) wouldn't notice £5k pa?

If they gave him the wrong figures - eg sent him a letter with the wrong commission rate- he may not need to pay back at all.

I suppose it depends what his normal salary is, but £5k a year is a fairly significant amount, so I'm a little surprised that he's superseded (iyswim)

The company (as long as they can prove it) have every right to recoup the overpayment as long it is doesn't cause financial hardship. I can't imagine any company writing £20k off

**surprised, not superseded

What is meant by financial hardship? Also, why not the gross?

Because they reclaim the tax.

Why didn't he notice the money?

With regards to financial hardship, we would work a suitable repayment plan, so that the employee can still meet their personal obligations (rent, mortgage, etc) but make an effort to repay

Yes he only physically received net so should only pay back net. If they work it back properly he will get the tax refund that he paid on the amount he shouldn't have received. Not that this will make much difference because overall he's still going to owe a lot of money.

Not sure why he didn't notice the money - I think his net money reduced because of some other loan that he was paying out on or it could have been that his pension increased. runny -how is a suitable repayment plan decided, i.e. what his a suitable repayment taking into account what he possibly owes?

sorry - what is a suitable repayment

It will be very hard for any of us to say. It will depend a lot on what his other financial obligations are and what his disposable income is.

I don't know but I think he spends what he earns on rent/bills etc. He has 4 children so goes on them. Has a partner who works but not a high earner. I don't think a lot of disposable income left

Under a legal ruling, known as payroll Estoppel, if the overpayment was not the employee's fault, the money has been spent and the employer led the employee to believe that the payment was correct, then any attempt to recover the overpayment would be deemed unlawful.

Yes, I'm still struggling to understand how he ended up overpaid and why he didn't notice. It really could be quite relevant to whether he needs to pay back.

I mean. Was his base pay right on his payslip? Was it something in commission or bonus? Did they fuck up his tax .

SueDunome - unless your contract states otherwise?

Angel - I would wait for the employer to provide full evidence that they have made an overpayment.

That's good to know. Found this article about it.
OP I bet your friend's employers are really hoping he'll repay without finding out about that...

runnyhabbit - I'm not sure what you mean. A contract can state that an employer has the right to recover the overpayment. However, if estoppel is proved to have happened then this would supersede the contract. The key point is whether the employee can prove the employer led them to believe the payment(s) were correct. For example, if the employee can prove that he/she queried the higher payment and the employer assured them it was correct then estoppel would apply. If the employer issues annual pay statements showing what salary the employee can expect to receive, this would possibly be sufficient to satisfy the Court.

Sorry, I see what you mean.

Let's hope he prove that he queried it.

Apologies for link to Daily Fail but the lady in the article was in a similar predicament and did not have to pay back the overpayment www.dailymail.co.uk/news/article-1193009/Barclays-bank-worker-given-double-pay-error-getting-it.html

That lady had documents issued by the bank with the 'wrong' numbers on. That bit is key.

If she had a contract, mortgage reference etc saying 9k but was paid 17k it could have gone very differently.

That's why it is really important why the friend didn't spot the error.

Where I work both the employer and employee have the duty to check their payslip on a monthly basis and report any inconsistencies. We've often had issues with overpayment where staff haven't come forward and we will chase them for the money, whether it's been spent or squirrelled away somewhere.