Can my employer take back money they have overpaid me from my wages?
The law provides protection against unlawful deductions from wages, and if your employer makes an unlawful deduction you may have the basis for a claim in the Employment Tribunal. The protection from unlawful deductions from wages is covered by section 13 of the Employment Rights Act 1996 which prevents employers making deductions unless they are:
- required/authorised by law, i.e. tax and National Insurance;
- permitted by a clause in your employment contract, or
- where you have consented to the deduction; i.e. for a loan etc.
Wages are defined as any sums payable in connection with your employment including any fee, bonus, commission, holiday pay or other payment linked to your employment, whether payable under your employment contract or otherwise. The majority of payments you receive will be covered by this definition of ‘wages’.
Recovery of overpayments of wages
Overpayments can arise because of a genuine payroll error or miscalculations of wages, bonus’, or commission.
If there is an express provision within your employment contract then the Employer can rely upon this clause to recoup money paid in error.
If, however there is no express provision within your contract the Employer would have to rely on an exemption to unlawful deductions from wages within Section 14 of the Employment Rights Act 1996. This allows deductions to be made where there has been an overpayment of wages, thus enabling the Employer to correct any errors in their payroll process.
Other issues to consider
If your employer acts unreasonably in deducting the money or does so without giving you any notice then they could be in breach of their implied duty of trust and confidence. In this case you may be able to resign and pursue a claim for constructive unfair dismissal. Before taking this step you should however seek some advice specific to your case.
You should be given the opportunity to agree a repayment period with the employer particularly if the amount being claimed back is significant. Your employer should also give you enough notice of the deduction to enable you to make alternative arrangements. Employers should not apply a deduction that will leave you without enough money to pay your bills.
Overpayments after you have left
If you have left your employment with the employer and they claim that you owe them overpaid wages the position is slightly different and is the subject of a separate article which will be published shortly.
In the meantime you can always contact me on 023 8098 2006 or 01983 897003 if you would like some advice.
This blog post is a summary of the law at the time that it is written and has been produced for the purposes of information only. It should not be substituted for obtaining legal advice that is specific to your particular circumstances. Employment law changes frequently and the law may have changed since this was written. It is important to ensure that you have up to date advice.