Where an employer discovers an overpayment to an employee only after the employee has left the organisation, what are its options?

Where an employer discovers an overpayment to an employee only after the employee has left the organisation, it can contact the employee and seek to reach an agreement for him or her to repay the amount, either in one payment or in instalments. If the employee does not agree to repay the amount, the employer can consider bringing a claim in the civil courts for restitution.

If the employer has not yet made the final payment of the employee's salary, it can deduct the overpaid amount, in full or in part, from the final payment. Such a deduction will not be unlawful under the Employment Rights Act 1996, but the ex-employee could bring a claim in the civil courts arguing that he or she has changed his or her position, as a result of the overpayment, so that it would be inequitable for the employer to recover it. To avoid such a claim, the employer should seek to obtain the employee's consent to the deduction before making it.