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Almost a quarter of workers fail to flag overpayments
Those who were overpaid were only forced to take a reduced income to settle the issue in 63% of cases.
HRD Connect
August 29, 2024
Just over one in 10 officer workers reveal they have been accidentally overpaid by their employer, with almost a quarter of them failing to flag it.
That’s according to a survey commissioned by The Global Payroll Association (GPA), who has also produced a guide to inform employees of what is likely to happen if they are overpaid by their employer, what action they should take, and how likely it is that they will be required to give back any money that has incorrectly found its way into their bank account.
The survey of 6,388 UK office workers found that 11% of employees have at some point been accidentally overpaid by their employer. .
How does overpayment happen?
There are a number of reasons why someone may be overpaid, but it’s most commonly a result of errors made within various departments when reporting information to their payroll team. For example, HR or line managers may have provided incorrect details for employee records, they may have failed to notify payroll when an employee leaves the company, or they have done so after the monthly cut off date.
Other common errors that arise from a lack of proper internal communication include changes in salary and, in fact, the GPA found that miscommunication between management and payroll was the leading cause when it came to overpayment of employees.
What happens next?
Overpayments are not always spotted right away, but due to the financial losses involved for the company, the employer is almost certainly going to notice the error sooner or later.
Despite this, the GPA found that as many as 23% of those who were accidentally overpaid chose to keep it to themselves. And in fact, 39% of those stated that the overpayment was never flagged, although in the majority of cases, it was clocked within a month.
When the error is spotted, the employer has the right to reclaim the money that has been incorrectly paid.
While the Employment Rights Act 1996 does protect employees from unlawful wage deductions, there is an exception relating to cases of overpayment which allows employers to correct the error by either asking for the money back, or deducting it from future payments until the books are even.
Employers also commonly include a clause in the employment contract which stipulates that, in the event of an overpayment, deductions can be made from future payments.
Overpayments usually result from miscommunication and in the vast majority of cases it’s simply down to a change in circumstances that isn’t relayed to payroll, either in time for their monthly cut off date, or at all.
This can be a challenging issue to overcome for payroll departments as even the most modern of systems can’t account for human error in such instances.
It highlights the importance of investing in proper payroll professionals, not just payroll tech, as doing so can ensure that your payroll function operates as it should, without the inconvenience of retrieving overpayments made to employees.”
Perhaps surprisingly, the GPA found that those who were overpaid were only forced to take a reduced income to settle the issue in 63% of cases.
If an employee has left the company after receiving an overpayment, the employer still has the ability to claim it back, either through an informal request, or, if needed, a formal legal process.
All of this, of course, relies on an employer noticing that they have made an overpayment error, and if they don’t realise, is the employee likely to flag the mistake voluntarily?