I am a human resource manager and have been advised by a colleague in our payroll department that we have overpaid a member of staff. I have had one meeting with the employee who suggests they are now going to leave the company. How do I recover the overpayment? How do I handle this?

I suggest it will be necessary to examine the employee’s contract of employment and the company’s policies and procedures to ascertain the existing power, if any, available to the company in attempting to reclaim this overpayment. You may be aware that under the provisions of the Employment Rights (Northern Ireland) Order 1996, the company could be at risk of an allegation of unlawful deduction of wages if the company attempts to recover the overpayment without the necessary provisions first being in place.

To avoid such an allegation of unlawful deductions, you should examine the employee’s contract to ascertain whether there are provisions which would automatically allow the company to deduct this overpayment from the employee’s wages. Deduction from salary could be allowed if the employee has given prior written consent, before the deduction is made. You should therefore check whether the employee has signed their contract of employment which incorporates the employer’s ability to make the deduction of the overpayment from the employee’s salary. If the contract, or a deductions policy, has not already been signed by the employee, the company would have difficulties in making unilateral deductions from the employee’s wages, without risking allegations of unlawful deduction of wages.

You should therefore make these enquiries and, I would suggest you then arrange to meet with the employee. Assuming there are already provisions allowing you to make the deduction, you should advise the employee how the company will seek to recover the overpayment e.g. the full amount of the overpayment, the proposed weekly or monthly deductions. Should the employee not have already provided written consent to the company to deduct monies from their salary, you may wish to ask the employee to sign such written confirmation now, before any of the overpayment is recovered. I suggest you then agree a repayment plan with the employee until the full amount of the overpayment is repaid to the company.

If, as the employee suggests, they leave the business, if the employee has already provided written consent for deductions from wages, the company might seek to recoup the overpayment from the employee’s last salary. Provided the employee’s salary before deduction meets the requirements of the National Minimum Wage, the company could offset the outstanding overpayment against the employee’s salary, even if this leaves the employee with nothing. I appreciate in the circumstances however this might not be a step the company wishes to take.

In the absence of a voluntary repayment arrangement with the employee, or if the employee leaves the company before the company has an opportunity to recoup the full sum, the company could consider the issue of civil proceedings against the employee to recover the full overpayment, or balance outstanding. Dependent on the amount of the overpayment, proceedings could be issued in the Small Claims Court for up to £3,000, or in the County Court if the balance exceeds that amount.  You may wish to undertake an Enforcement of Judgments Office search to ascertain if the employee has any existing judgments registered against them. Of course, even if the company succeeds in obtaining a judgment against the employee for the overpayment, it does not guarantee their ability to repay.

I suggest you engage with the employee as quickly as possible in the hope of being able to recover the overpayment from future salary or agree a voluntary repayment plan.