Overpayments and Deductions from wages

Our very own Jodie Hill was on Look North a few weeks ago discussing the “payroll chaos” experienced by warehouse workers in Barnsley.

The employer had experienced a payroll issue last year, whereby people were both overpaid and underpaid, and which they were resolving by deducting from wages. Reportedly, the employees were not informed when their wages were being reduced, and some workers were left without enough money to eat, pay for bus fares, and for other living expenses.

As Jodie explained on the programme, legally, if a worker has been genuinely overpaid, employers are entitled to reclaim the overpayment by making a deduction from wages.

Where the purpose of a deduction is to recover an overpayment of wages or an overpayment in respect of expenses, the unlawful deductions from wages regime of the Employment Rights Act 1996 does not apply. It does not matter why the worker was overpaid, but rather it applies where an overpayment is “for any reason”.

However, this is strictly the legal position. Jodie also explained that, as a responsible employer, it is considered best practice to discuss and agree a repayment plan with the employee. Not to do so may breach the implied terms of mutual trust and confidence between employer and employee, and runs the risk of a large number of resignations or grievances.

This communication does not appear to be occurring in this instance, or at least it is not occurring to an extent that employees know where they stand on a day to day basis. Ms Deanne Ferguson, GMB regional organiser, explained “their payslips can be very hard to understand, so in some instances where there’s been an overpayment, workers have not necessarily realised. Then the next month there’s been a big chunk taken out of their wage and all of sudden they’ve got no money left.”

This matter clearly demonstrates the importance of an employer communicating with their employees, rather than simply doing what they are legally able to do. Moreover, the fact that the issue was discussed in local news and we are still discussing it now, shows the potential reputational consequences of not keeping open lines of dialogue with your employees.

 

If you require any assistance regarding deductions from wages, please contact us and we would be happy to help.

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