Everybody knows that the STW hive mine loves a good work dilemma, so I would love to see what the consensus of opinion is on this one!
A ‘colleague’ has been overpaid, due to a payroll cock-up for three years and the amount, over this time has obviously been significant, in the 10s of k. The ‘colleague’ is now wondering where the company can go with this, specifically can they be asked to repay and can the salary be changed to the correct level immediately.
From a more personal/ethical perspective, if the ‘colleague’ had adapted their standard of living to the increased salary, should they be given any time to make adjustments in preparation for the new, lower, salary.
Thanks for any input.
P.S. No union and yes the ‘colleague’ should have recognised the increase as a mistake
This happened to me. They got their bit back once they realised.
There hay be a limitation on it though. Where we have suppliers that have not invoiced there is a duty on them to make any claims within 2 years of any work done. So there may be similar re payroll. Worth checking.
Depends. Need more information before I feel sympathetic or get my pitchfork.
How much is the over payment on a monthly basis
What is their base salary
Do they get commission, bonuses, overtime that causes their salary to fluctuate
If they are on 100K a year with some bonuses etc thrown in, then a couple of hundred a month may not have been large enough for them to have realised?
But did they know/realise? If yes then bang to rights and should have fessed up straight away.
...move to Dubai!
specifically can they be asked to repay and can the salary be changed to the correct level immediately.
If the 'colleague' is you then I think you know the answer!
I'd also guess you'll be on a lower take-home while they recoup the overpaid wages.
What did their contract say?
You need to talk to employer, they will agree a repayment plan with you.
Sorry, your colleague
No idea on the legalities, but if I was your "colleague" I'd be doing 3 things and not doing 1.
The things I'd be doing is starting to plan for life without that extra amount coming in each month.
I'd also be starting to plan how to pay it back, not in 1 chunk but £x per month. Being on the front foot with what you can afford and what is reasonable seems sensible to me.
I'd also be looking at an tax implications, and impact on things like pension.
What I'd not be doing is telling HR/payroll. If it was a month or 2 of pay then I would, but for this long I'd be leaving it for them to work out themselves.
Happened to a colleague of mine - payroll/HR cock up. Paid about £1k per month too much for 6 months. They didn't say a word (the colleague). They will have to pay it back. Why didn't they check ? We can't even work out how it happened as there was no promotion, no pay increase. He did receive an acting up allowance, but has been receiving this for a couple of years, then it suddenly jumped up more recently.!
Moral question, this is HR they're dealing with, so no.
As for the repayment, ACAS say that they should agree a repayment plan that suits both parties, I would guess at least as long as the over-payment went on.
I'm sure it's tempting to leave and never come back, I'm not even sure it would be that much of a disaster. There's no credit agreement involved so there's no simple way of enforcing it. No way to prove intent to steal or defraud, they might decide to send a few letters and draw a line under it.
The employer is more than likely to have the right to recover the money. The colleague had better brace themselves to not just lose the overpayment, but also a chunk less as they pay back the 10's of thousands.
and yes the ‘colleague’ should have recognised the increase as a mistake
hhmm, can't imagine how they didn't notice an increase that was significant enough to allow them to change their standard of living
Happened to me when I started a new job.
Got paid. A day later I got paid a much lower figure, I just assumed it was a correction or something to do with tax etc as it was a brand new job.
A few days later, HR were in touch asking for it back, they explained that it was a payment supposed to go to a P/T worker (hence the much lower figure) who obviously had a similar name or something.
The next month, it happened again! Muppets. Took a while to sort it out.
This sort of thing throws up wider implications though around tax, pension, NI and also how rigourous (or otherwise) your company's audit processes are. Cos it just shouldn't be happening. Even if it is an honest mistake on everyone's part, the implications for the employee could be horrific if they suddenly have to pay back ££££. Complicated by factors such as inflation, legitimate pay rises, holiday time, sickness...
Mrs dB got paid during some unpaid leave & taxed accordingly 18 months ago, repaid her employers which she left not long after & is still waiting for tax situation to be sorted - proper pain in the arse.
Yeah it sounds tricky. If I was overpaid £1000 by work, and taxed at 20%, how much do I pay back?
£800, the amount I actually received?
Then what happens to the £200 that went to HMRC - would work have to chase that up with them directly?
Back in my days as a bank clerk, we used to key a lot of payroll runs on a Wednesday so they hit the recipients' accounts on the Friday. The keying sheets were pre-printed with the names in the same order as the names would appear on the screen and the company would fill the sheet in with how much each person was to be paid. The keyer (me), didn't have to worry about looking at who was who, they just keyed in the amounts as per each row on the sheet.
However, if, say, the company was paying a lot of people and therefore had multiple sheets, you did have to be sure that the sheets were in the right order before you started. Oops. That caused some palaver, let me tell you.
Some of this depends on your (sorry, "your colleague's) part in all this.
If you they have sat there knowingly accepting a larger paycheck than specified each month and just keeping quiet then it's much more clearly defined as fraud than if you they genuinely thought they earned £x per month and has just got on with life.
Like one of those "bank error in your favour" cards at Monopoly...
Might want to think about how it gets framed in any future discussion and how significant the sum is. If the job is supposed to be paying £30k but has actually been paying a salary of £50k, "the employee" is going to find it considerably more difficult to pretend they knew nothing about that than if it should have been £30k but they've been paid £33k.
I got credited with an extra day holiday too early once. Was supposed to get it after 10 years, went on the booking system after 5. I never noticed because the system actually works in hours so 1/2 day holidays can be managed. Anyway, they realised during my 9th year and sent me a letter apologising that the extra day would be removed, but as it was entirely their mistake no clawing back would be attempted.
Following year I'd done the 10 year service and it came back for good. 😁
From a more personal/ethical perspective, if the ‘colleague’ had adapted their standard of living to the increased salary, should they be given any time to make adjustments in preparation for the new, lower, salary.
the employer has every right to reclaim the money and decrease the salary with immediate effect. The colleague is deluded if they think they should be given time to adjust their standard of living! That’s just ridiculous.
The ‘colleague’ should have queried this rather than adjusting their standard of living to suit a salary they weren’t entitled to.
I got paid whilst on a three month unpaid sabbatical. When I got back they contacted me asking did I want to pay it back or go three months without a salary. I said it would be easier to just not to pay me for three months since I had the money in my account anyway.
The same happened to a colleague of mine a couple of years beforehand, but over a six month period. He refused to acknowledge they'd been paying him and ignored all further contact about it, or so he said - and reckoned he'd got away with it. I wasn't going to try and be so brazen!
Thanks all, really appreciate your thoughts.
To answer one of the questions which came up, the difference we are talking about is in the region of a 20% overpayment.
The other scary thing is how common mistakes like this appear to be!
A similar situation happened at my work; an employee dropped to 3 days a week but work inadvertently continued paying then for 5 days. When the reason for the shorter week was no longer (several years later) there they requested to go back on 5 days. It was at this point HR noticed the cock up and immediately dropped their wage to reflect the hours being worked and said the employee could return to 5 days a week and be paid for 5 days. There was no attempt to reclaim the overpayment as HR accepted it was their fault. The employee resigned as they had been expecting a 66% increase in salary to reflect the extra hours being worked.
What did their contract say?
This.
I work in Payroll technology, by-the-by, but was also over[aid this month due to a processing error. Payroll manager was against writing it off and said its in our contract that payroll errors can be recouped.
Unless there's a strong case why it shouldn't be recouped. IMO 3 years is ridiculous and wtf kind of monthly / annual checking are(n't) the company doing? I'd go fighting down that line.
Yes the employee should be checking, but even working in the space I look at my payslip each month and end up making an assumption its correct.
Someone I know was paid for a few months after leaving one job and starting another, I believe they sent a letter to the old company telling them that they were paying down a loan with help from parents so didn't think the extra money was unusual (no phone banking then) and had no means to pay it back and could they please stop. They never heard anything back but the payments stopped.
To answer one of the questions which came up, the difference we are talking about is in the region of a 20% overpayment.
That's going to be a total mess to unravel the tax, pension and NI contributions. However, even a 20% pay discrepancy, I can see how it'd go under the radar. To take my earlier example of a £30,000 base salary, the take home on that is about £2100, the take home on 20% more than that (£36,000) is about £2450 so unless you're looking closely at it, I can see how it'd be like "yep, been paid, all OK".
Obviously if it's a base salary of minimum wage the difference would be even less whereas if it's up at £70,000, 20% more is £84,000 and "not noticing" that would be kind of hard to explain!
To take my earlier example of a £30,000 base salary, the take home on that is about £2100, the take home on 20% more than that (£36,000) is about £2450
Factor in a student loan and a 5% pension contribution and we're looking at more like 2000 and 2300 - an even smaller difference again...
To take my earlier example of a £30,000 base salary, the take home on that is about £2100, the take home on 20% more than that (£36,000) is about £2450 so unless you're looking closely at it, I can see how it'd be like "yep, been paid, all OK".
But then your P60 would also show the £36000 each year. Not that I imagine a lot of people spend time reading it
That's the other thing, the average payslip is an absolute mess of lines - tax, pension contribution, benefits deductions, car payment, transport pass loan etc. It can be impossible to work out what's been paid/ deducted on what lines and why
I would do nothing and wait for hr to get round to contacting me. I would then be demanding an explanation as to how it happened and what reassurances they could give that they won’t do it again. I would also question why none of the financial processes and checks hadn’t spotted it. I would also get independent professional advice as hr are there for the companies benefit, not yours. Assuming it has to be related I would only agree to a very long and very slow repayment and clauses about not repaying in the event of redundancy / constructive dismissal.
ps. I would also demand a very detailed calculation of exactly what the overpayment amount is and how they got to that number
But then your P60 would also show the £36000 each year.
This is where it gets tricky for both parties. Noticing, and correcting, at end of the tax year is something that both parties should be capable of. If it’s occurred over many years, with no one noticing, it’s a complete mess. The tax implications are such a mess that the employer could decide to only recover for the last tax year, and let the previous years slide. They also are likely to lose trust in the employee as well though.
The other scary thing is how common mistakes like this appear to be!
The scariest thing is how people don't know what their take home pay should be to the penny, and able to spot any variance.
If its as common as you think then it could easily be 20% too low, hence the need to have a proper handle on this stuff
That's the other thing, the average payslip is an absolute mess of lines - tax, pension contribution, benefits deductions, car payment, transport pass loan etc. It can be impossible to work out what's been paid/ deducted on what lines and why
I find my payslip very clear and easy to understand.
My other half works for a local authority and I can't make any sense of hers at all. She was working on temporary contracts for many years and was overpaid by a tiny amount once, can't remember exactly but certainly <£100. No way you could notice with multiple overlapping contracts and fractions of a payscale etc. The power crazed jobsworths in the local authority HR dept went from 0 to nuclear in one step, no phone calls, emails, line manger conversations or anything, just a letter from a debt collector demanding payment or the bailiffs were coming round. Like somebody in a professional role with decades of experince is going to jeopardize their career by deliberately defrauding their employer for less than a hundred quid. Half-wits.
My SO left a job two months ago and appears to still being paid, she has contacted the former employer after both payments and is currently putting the money in a savings account to minimise temptation.. See what happens.
The scariest thing is how people don't know what their take home pay should be to the penny, and able to spot any variance.Hardly, mine currently varies by several hundred pounds a month, has done as long as i've had this job. My last job was *better* as in it only varied in the 80-100-120 sort of range. As long as i had no overtime. Or expenses. Or travel per diems. Or mileage. That could easily come to an extra 3 grand in a month, made more confusing as OT was paid a month in arrears, expenses were paid the next nearest pay period, with a two week lead (so could be 2 or 6 weeks off, depending on processing date, not submission date). So, yeah, i've had 25 years of no concrete salary. Other than the top line.
Just checked my contract. It says that it is my responsibility to check and also repayment is over the same length of time as the overpayment.
Yeah it sounds tricky. If I was overpaid £1000 by work, and taxed at 20%, how much do I pay back?
£800, the amount I actually received?
Then what happens to the £200 that went to HMRC - would work have to chase that up with them directly?
your payroll department and HMRC sort it out by adjusting your PAYE deductions. Or you do a self assessment at the end of the year and get any overpaid tax back
Am I the only one thinking 'that money doesnt belong to you, you need to find a way to give it back asap' ?!
This is where premium bonds come in really useful.
When you're in a situation that you may have to pay money back, put it in Premium Bonds. For as long as you have it you'll be collecting the prizes which may come, you'll have the monthly excitement of checking, and if you have to repay it you can do it without leaving yourself short.
Am I the only one thinking 'that money doesnt belong to you, you need to find a way to give it back asap' ?!
Nope, agreed. A small issue that could have genuinely been missed is one thing, this particular example doesn’t really sound that way.
The size of the violin being played at this point if 'your colleague' ends up having to adjust their life significantly to accommodate both the correct salary and the repayment of past errors depends rather on if 'your colleague' was actually aware of the error for all this time or just made the assumption what they were getting paid was correct.
I have little room for the moral high ground however. 20 odd years ago when I withdrew the £1500 I needed to pay for an engagement ring the cashier put the £1500 down as a deposit rather than a withdrawal. I was aware of the error and waited for them to work it out....which they didn't. So I'd be very hypocritical to come down all righteous.
Many, many moons ago (1999, the days of 63mm travel and fancy caliper brakes) I was working for a bank which may or may not have been involved in the kick off to a global financial crash, let's call them Southern Stone.
I had put in my notice to leave and go to another job, they continued to pay me for a further few months. As I was still close to a number of colleagues I called in to see them and discuss it with my old manager, she introduced me to some people in payroll and they said they would deal with everything, the 2nd month they paid me I rang in to speak with the payroll folk who assured me that everything was in hand and not to worry, same again month 3. Month 4 began with a court summons and threats from the legal team.
I rang up the legal team involved and informed them I had made the company aware of the situation and was 'somewhat' disappointed to find legal action at my door.
Month 5 began with another payment from SS.......
Eventually they decided I owed them £1000 and it must be paid by the end of the week. I promptly paid and walked away happy and unsurprised by the resulting financial meltdown at SS.
I just tried to think of any occasion when I had been erroneously overpaid.
In 2011ish I received some radio royalties for plays on Swiss radio for a Rihanna tune, that had the same name as one of mine. About £550 worth.
That year my income was only about £6k, so I figured I probably needed it more than her, and spent it on rent.
I'm sure it's tempting to leave and never come back, I'm not even sure it would be that much of a disaster.
Small risk that the company would notice when calculating the final pay slip and determine that it should be £zero 😄
Easy to say just suck it up but if this happened to me, I'd be in all sorts of bother paying it back.
One of the places I worked overpaid a charity years ago! 10,000 became 1,000,000 when someone added 00 for pence in the wrong place. We found out when the CEO of said charity called our CEO to thank them for the generous donation! Awkward conversation. Charity were very good are repaid the company.
Most employment contracts have a clause to allow companies to recover overpayments. Unwritten rule in my place is repayment over the same period the payments were made.
Years ago when I was a self employed stubby, I was deducted the 20% CIS payment. I informed them they had deducted it in error so they refunded me the 80%. I shut up and took it. There were other folk on my team who were gash getting paid the same as me.
Nowadays every year I get letters from HMRC stating I've either paid too much or too little tax depending on the overtime worked.
Sorry but if your company find out you will be on the hook for it, in my experience. My company will usually look to recoup the money over a 6-12 month period (depending on the amount) but the amount being deducted cannot leave them under minimum wage so the 12 months are extended in that situation. If you leave they take it off your final salary then recoup any remaining and if the colleague refuses to pay/engage at all then it is passed over to a debt collection company. They will always work with the colleague around payment terms as best as they can to avoid that situation though.
your situation sounds a bit extreme though (a few months etc is the biggest I have heard of) if you, sorry your colleague has been 20% overpaid for 3 years I think it would be be reasonable for your employer to write if some of the debt due to length of time, but that means alerting them, explaining how it has just come to light etc and seeing what the want to do.
the longer it goes on though the bigger the hole you/they will be in. You/they could resign and hope they don’t realise.
your situation sounds a bit extreme though (a few months etc is the biggest I have heard of) if you, sorry your colleague has been 20% overpaid for 3 years I think it would be be reasonable for your employer to write if some of the debt due to length of time, but that means alerting them, explaining how it has just come to light etc and seeing what the want to do.
I'd say it highlights some serious failings at the company in question.
Over three YEARS, no-one has bothered to check salary grades, tax codes, pension contributions and do a general payroll audit? What about salary increases during that time? I'm assuming even if the employee didn't move up any grades they should at least have got cost-of-living increases which should in itself have triggered a pay grade audit (if nothing else to work out any employees moving from basic rate to higher rate tax band)?
I wouldn't be surprised to find someone in Finance / HR on the take, skimming a bit off somewhere along the line and any discrepancies that are highlighted re the pay of any other employee suddenly leaves that person in Finance open to criminal proceedings. Hence why, miraculously, no-one has noticed or said anything...
Not that I'm cynical you understand. 😉
Wow crazy-legs that’s quite a world you live in! I’m not sure why you think a manual audit is needed to check for people moving tax bands - I doubt anyone is running payroll calculations by hand, the software does all this stuff for you. It’s fairly easy to miskey a number and suddenly some is getting 35000 instead of 30500 pa! When I I was in bigger companies I’d get an annual report with the salaries and proposed changes as part of the salary review process, but as it wasn’t always obvious what salary people would be on - the concept of “grades” is the sort of thing you find in unionised workplaces. From a spreadsheet there is no way to know if Mr X should be on 30500 or 35000 and if other people in that department east 30-40k it wouldn’t stand out as an anomaly.
FWIW for the OP - HR will say it must be repaid. I had an issue with an employee who returned from Maternity leave, went down from 4 to 3 days and company kept paying her 4 days. That was probably hard to spot the first couple of months as tax/mat pay stuff would all be changing - but she “should” have noticed it a few months in. Came to light after a year and HR were as unhelpful as you would expect. The payroll admin was similarly “must be repaid”, “their responsibility to highlight errors”, etc. I had a cup of coffee with the finance director and pointed out she was very hard working, a valued employee and that if we treat her shit for their error she would be time consuming and expensive to replace. He made the problem go away but HR and Payroll were furious.
your payroll department and HMRC sort it out by adjusting your PAYE deductions. Or you do a self assessment at the end of the year and get any overpaid tax back
Except she left shortly afterwards & have you tried to get HMRC to do anything recently, especially when it requires ex employer to also tell them about now non existent over payment.
Wow crazy-legs that’s quite a world you live in! I’m not sure why you think a manual audit is needed to check for people moving tax bands - I doubt anyone is running payroll calculations by hand, the software does all this stuff for you. It’s fairly easy to miskey a number and suddenly some is getting 35000 instead of 30500 pa!
That’s why you have budget holders who should notice that their payroll costs have suddenly jumped up. Or that payroll is suddenly costing significantly more than it should. It is pretty much the only job of payroll to pay staff correctly.
your payroll department and HMRC sort it out by adjusting your PAYE deductions. Or you do a self assessment at the end of the year and get any overpaid tax back
Except she left shortly afterwards & have you tried to get HMRC to do anything recently, especially when it requires ex employer to also tell them about now non existent over payment.
It would be on your P60 at the end of the year (or your P45 on leaving if before year end). You fill in your tax return (anyone can opt to do one) and would sort it out at year end.
Over three YEARS, no-one has bothered to check salary grades, tax codes, pension contributions and do a general payroll audit? What about salary increases during that time? I'm assuming even if the employee didn't move up any grades they should at least have got cost-of-living increases which should in itself have triggered a pay grade audit (if nothing else to work out any employees moving from basic rate to higher rate tax band)?
I wouldn't be surprised to find someone in Finance / HR on the take, skimming a bit off somewhere along the line and any discrepancies that are highlighted re the pay of any other employee suddenly leaves that person in Finance open to criminal proceedings. Hence why, miraculously, no-one has noticed or said anything...
Really? The reality in a large corporate is that your team is often made up of people on quite widely varying salaries for very similar jobs. There might be a salary band that they're supposed to be paid within but that usually mainly applies to internal promotions. If it's someone recruited from outside they will have been paid 'market rate' probably based on what they were on elsewhere (and it might have been necessary to pay above the top of the band to get anyone. Some people will have moved internally and might have been paid more in another role for unknown reasons (they might have been redeployed to a lower grade job as part of a reorg, but salaries are almost never dropped, usually just frozen until they're back in band).
If you've got a team of any size there are almost always vacancies so one person being paid more than they should have been won't take you over.
Sorry but if your company find out you will be on the hook for it, in my experience. My company will usually look to recoup the money over a 6-12 month period (depending on the amount) but the amount being deducted cannot leave them under minimum wage so the 12 months are extended in that situation. If you leave they take it off your final salary then recoup any remaining and if the colleague refuses to pay/engage at all then it is passed over to a debt collection company. They will always work with the colleague around payment terms as best as they can to avoid that situation though.
Blimey, this makes it seem like a pretty regular occurrence at your work @andy4d! How often does all this go on?
would sort it out at year end
😆
This is HRMC. It can take years to get sorted. Well it did when I overpaid NI. I didn't even chase it. They started a process of paying it back to me, then them insisting I pay it back with interest and fines, them them paying it back again, then asking for it back again... when the merry go round finally stopped I was out of pocket (but didn't want to do anything about it because I just wanted it to stop). Then it turns out that I didn't get credited with NI years for the period I overpaid for. Fun.
Way too often, costs the company a fair wedge every year. Whole new payroll system/provider introduced early this year to help reduce errors. Old system relied too heavily on manual input new one is all electronic with clocking in etc.
Wow crazy-legs that’s quite a world you live in! I’m not sure why you think a manual audit is needed to check for people moving tax bands - I doubt anyone is running payroll calculations by hand, the software does all this stuff for you. It’s fairly easy to miskey a number and suddenly some is getting 35000 instead of 30500 pa!
That’s why you have budget holders who should notice that their payroll costs have suddenly jumped up. Or that payroll is suddenly costing significantly more than it should. It is pretty much the only job of payroll to pay staff correctly.
If your payroll costs were the same every month you might notice a significant change, but in that example its £375/month different - if you have ~20 staff it's a <1% variance, and if you have people joining / leaving / being promoted / working overtime / paid differentyl for being sick/overtime etc. there is no way you will spot that unless you have nothing to do except trawl for errors.