Is a £500 deduction from my salary allowed?

[TwinklyGiraffe]

I get childcare vouchers of £240 per month.

Payroll is administered centrally for thousands of employees.

They’ve mistakenly reduced the amount of childcare vouchers they pay me.

The company I work for (education) then pay from their account into my childcare voucher account.

Payroll deducted £140 per month but my place of work putting £240 of vouchers into my account.

I didn’t notice this as I never look at that deductions just the net pay.

My company didn’t notice until this week, 6 months later and are now demanding I pay them £500.

Although it’s not my fault, I fully accept I have been overpaid.

I just can’t afford to pay it back in one go.

Are they allowed to instruct payroll to reduce my salary without my consent?

There's probably a clause in your contract which allows them to recover any overpayment, but have you asked them if they'll spread it over a longer period rather than take it all in one go? As it's their error it's worth asking for some leniency over the repayment period.

They overpaid you over 5 months so it would be perfectly reasonable for you to request to repay it over the same period. They may still refuse but you could try pleading financial hardship and appealing to their better nature and get your manager on board to plead your case to payroll too.

Don't forget it's a salary sacrifice deduction too, so £500 in vouchers actually works out to £340 in your take home pay (£295 If you're paying student loan).

THanks so much for the reply.

I’ll have to point out to them about it being a salary sacrifice scheme, they are adamant that the overpayment was £500 vouchers so I owe £500 cash to them.

How much did you actually request in vouchers? If 240, then point out that it's not an overpayment of vouchers, it's actually an under-deduction for the vouchers you ordered, therefore the deduction needs to be processed as a salary sacrifice childcare voucher deduction. If they try to take it as a net deduction then I'd want to argue that's an unlawful deduction - they are entitled to correct their error, but to do so they should process the deductions in the way they should originally have been processed ie. via salary sacrifice.

If you only wanted 140 in the first place and haven't spent the excess, tell them to get the vouchers back from the voucher provider and leave you out of it.

It’s very hard for me to understand,

I wanted £240, the payroll people deducted £140 from my salary.

However my school created £240 to my voucher account. So there’s a difference of £80 each money. They say I owe them £80 for each month but I think it’s not that much due to the fact it is a salary sacrifice scheme. I don’t know how to work it out or who to ask for help

you need to talk to them as you get the amount tax free, so you don't pay tax on that 240 per month.

Are they sure they haven't just worked out the tax wrong?

The vouchers are good because you don't pay tax on that portion of your income, so you should see 240 a month taken out of your pay, AND see that you're paying less tax (how much depends on what % tax you pay). You need to get a payslip from before you started doing this and see how your tax has changed.

It's possible that they've messed up the tax somehow and have processed this wrong. Go back and double check everything.

They take the money off your top line (before tax and ni). They should have taken £240 but they took £140. So they need to take the £500 to sort it. Again this comes off your top line. This will only cost you £350 (or whatever) in your pay as you would have paid tax and NI on that money to see it in your pay packet (but it’s tax free if it goes to the school). Does that make sense?

So pay back the £500 off your top line and it will cost you £350 (ish). Don’t send them a cheque for £500.

I was overpaid due to a payroll cock up once, they let me pay it back in instalments. Just ask them if you can do that and let them know a manageable monthly amount.

Looks like they've tried to calculate the net amount you owe them by just taking the tax off the gross amount (6 months at £100 = £600 minus 20% tax gives the £500 they've quoted).

You need to go back to them and point out they haven't taken into account the NI saving too so they need to readjust their calculations.

Are they asking you to repay it back to them directly? They should be deducting it back through the payroll as a sal sac deduction so your taxable pay figures etc are correctly submitted to HMRC.