Recovering an overpayment of Wages

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overpayment of wages

Even in the most well-run of companies, mistakes can occur in payroll accounting which results in employees being paid more than they’re owed. When this happens, the most important thing for employers to understand is how to deal with recovering an overpayment of wages in the right way, so as to not cause any legal disputes on the matter. Whilst an employer is absolutely in the right to ask for that money back, there are right and wrong ways to go about it.

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Employee Contracts

One way to avoid much of the unpleasantness that might occur when reclaiming overpaid wages is to draw particular attention to the overpaid wages section of the employee contract when it is first signed. Doing it at this point means that you’re managing expectations right from the word go and will likely also mean that your employees will be aware of it needing to be paid back, perhaps even before you are.

If your employee contracts don’t have an element that deals with the overpayment of wages, it would be advisable to have one added or your company could end up considerably out of pocket.

Backed By Law

Whilst employees are protected against unlawful wage deductions being made by the 1996 Employee Rights Act, overpayment doesn’t fall into the ‘unlawful’ category and employers are well within their rights to deduct money from an employee’s wages to rectify it. Most employees will be aware of their contract of employment, but many don’t read the finer details and if they only become aware of the rules pertaining to repayment of overpaid wages when they discover that it’s missing from their pay, it can lead to feelings of grievance and that’s when disputes can arise.

Larger Sums

If it’s a slight error that’s only regarding a small amount of money, recovering it is relatively simple, but if the mistake is one that’s been going on for a while, we could be talking about a significant sum. In this case, taking all of it at once is likely to be an inappropriate way to deal with the problem, whereas a payment arrangement, with payments spread out into smaller, more manageable chunks is going to be the ideal solution.

Once the terms of repayment are agreed – which will need to take the employee’s financial situation into account – this should then be put into writing and signed by both employer and employee. If done correctly and tactfully, this is typically the end of the issue.


If the employee in question is no longer with your company, that doesn’t mean that the money can’t be clawed back, as employers still have the right to request repayment. If the final salary payment has been made and your ex-employee refuses to cooperate, this is where legal or recovery actions should begin.

Debt Collection Agencies

If you’ve arrived at the point where you’re having to take legal action, then you have two options. You can either pursue the civil debt through the courts, which can be a long, drawn-out affair that can cost more than the actual outstanding debt or you could take the much easier, cost effective method of instructing a professional private debt collection agency to recover it for you.

It is an interesting and empowering fact to know that less than 1% of the cases Frontline Collections act on require court action when recovering an over-payment of wages.

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Modern, Professional, Effective

Modern Debt Collection Companies in the UK should be able act on your company’s behalf to recover money from your ex-employee without using any untoward tactics that will reflect badly. The sole aim of a reputable, accredited debt collection agency should be to reach an amicable solution to the problem in good time, not to intimidate or threaten.

Some debt collection firms work on a no collection – no costs basis and typically, your case should be assessed and taken on if it’s felt that there’s a good chance of a successful recovery, with payment only be taken out of money you would have otherwise lost. Be wary of those that fly the no win, no fee banner as quite often they have hidden drip pricing strategies that are less than transparent.

Of course, there’s much that can be done to educate staff to check their pay for errors and about what to expect if over payment occurs, but there is a degree of solace in knowing that if things do get out of hand, there is an affordable, effective and professional way to sort it out.

That’s why so many companies these days are turning to using a Professional Debt Collection Agency as the only truly viable option for recovering an over payment of wages.

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Our friendly team of Debt Collection Experts are happy to help you today,