Recovering An Overpayment Of Wages – What Should You Do?

Recovering An Overpayment Of Wages – What Should You Do?

Have you accidentally carried out an overpayment of wages to an employee and need to retrieve the money back? Do not worry as this is extremely common in most well-run companies.

There are errors that can occur in payroll accounting which results in employees being paid more than they’re owed. Dealing with the recovering of an overpayment of wages needs to be done 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. This can be particularly disruptive to cash flow, especially for small businesses.

How Can An Overpayment of wages be Recovered?

We have compiled a list of methods that can prove extremely helpful when retrieving money owed from an overpayment that won’t end you up in hot water.

Employee Contracts

Avoiding unpleasantness that might occur when reclaiming overpaid wages is vital to ensuring the collection of the money.

One way to avoid this is to draw particular attention to the overpaid wages section of the employment contract when it’s first signed.

Ensuring this section of the contract is discussed at this point will mean that you are managing your expectations from the start.

Also, this will likely mean that your employees are aware that they will have to pay the money back, even before you mention it.

We advise that if your current employment contracts don’t have a section based on overpayment that you introduce this as soon as possible.

This is also good HR practice and will cover your back in the long-run, stopping your organisation being considerably out of pocket.

Backed By Law

The 1996 Employee Rights Act states that employees are protected against unlawful wage deductions – however luckily for you as an employer overpayment doesn’t fall into this category.

It is not unlawful for employers to manually deduct money from an employee’s wage to rectify any overpayment that has been made. By doing so, an employer will not receive grief from the employee as they’re well within their right.

It is a common misfortune that most employees will not read the finer details of their contracts which may cause issues down the line.

Even if they are aware of their contract of employment, they may only become aware of the rules pertaining to the repayment of overpaid wages when they discover that it’s missing from their pay.

This could potentially lead to feelings of grievance which is when disputes can arise and an unpleasant atmosphere be created in the workplace.

It is vital to ensure this doesn’t happen by ensuring proper communication is made.

Larger Sums

If it is a slight error that’s only regarding a small amount of money, recovering it is relatively simple.

Mistakes that have been going on for a while could potentially create a significant sum and create an even bigger issue.

There are good and bad ways of dealing with sums which are on a larger scale.

In cases with large sums, taking all of it at once is likely to be an inappropriate way of dealing with the issue as this can have severe financial impacts on an employee’s wage.

A payment arrangement, where payments are spread out into smaller and more manageable chunks, is usually the ideal solution to this situation.

Payment terms will be set out which will take into account the employee’s financial situation, which will then be put into writing. This contact will be signed by both the employer and employee to ensure dual confirmation.

If this is done correctly and tactfully, this is typically the end of the issue.

Recovering an overpayment of wages to Ex-Employees

You may be asking yourself, what if an employee leaves the company? Is the money now unable to be recovered?

If the employee leaves or is no longer with the company, that does NOT mean that the money cannot be recovered.

Employers are well within their rights to request payment, as it is still owed to them. As mentioned above, this should be stated in the employee contract and agreed at the start of employment with the company.

If the final salary payment has been made to the ex-employee, yet they are refusing to cooperate or pay back the monies owed, this is the point when legal or recovery actions should begin.

Professional Debt Collection Agencies

Hopefully, it will not come to this, but if you have arrived at the point where legal action needs to be carried out, there are two options.

1. Pursuing civil debt through the courts

Pursuing civil debt through the courts can be an extremely long and drawn-out affair. This process can also cost more than the actual outstanding debt which is going to negatively affect your cash flow and make matters even worse.

2. Instruct a private debt collection agency

Instructing a debt collection agency to recover your debt is the single best option for you should matters be made worse. Not only is this the best option, as it’s hassle-free and allows you to have peace of mind, but it’s also the most cost-effective method.

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

Modern, Professional And Effective

Professional Debt Collection Agencies which operate in the UK should be able to act on your company’s behalf to recover monies owed from your ex-employee without having to use any untoward tactics.

There are various companies out there that are still using negative tactics that will more often than not reflect badly on both themselves and the business they’re representing.

The sole aim of a reputable, compliant and accredited debt collection agency should be to reach an amicable solution to the problem in good time and not to intimidate or threaten.

When looking for a debt collection agency to recover a debt, you will more than likely hear of the phrase “no collection – no costs”.

Under this basis, your case will be assessed and taken on only if it’s felt that there’s a good chance of a successful recovery. Payment would only be taken out of money that you would have otherwise lost.

Be wary of those that fly the “no win, no fee” banner, as quite often they have hidden pricing strategies that are less than transparent.

There are various ways in which staff can be educated to check their pay for errors and what the process revolving overpayment will include.

It’s reassuring to know that if things get out of hand due to an employee not agreeing to give back money owed that there is an affordable, effective and professional way of dealing with this.

Why Choose Frontline Collections To Recover An Overpayment Of Wages?

A large majority of companies these days will turn to Professional Debt Collection agencies as the only truly viable option for recovering an overpayment of wages.

Frontline Collections has supports companies from every working sector, including Dental Practices, Nurseries, Private Education establishments.

We operate a service that includes:

• High Collection rates and Low Commission rates
• 90% Recovery rate on undisputed Debts
• Members of the Credit Services Association
• On-Line Access to Accounts for Multiple Debt instructions
• FREE Pre-Action Risk Analysis of your debts
• Debt Collection Officers to visit Debtors
• Free tracing & Investigation of Debtors where appropriate
• Legal dispute mediation Team – Less than 1% of cases ever require court Action
• Fixed Low-Cost service that is Robust & Highly Effective
• International Debt Collection Team to collect Debts in the EU, USA & Overseas