Where an employer has accidentally overpaid an employee, what might be a "reasonable" programme of repayment or deductions?
Where an employer has accidentally overpaid an employee, it can attempt to recover the overpayment by agreeing a repayment schedule with the employee or by deducting the amount from his or her salary. If the employer decides to recover the overpayment by making deductions, it should ensure that it does not act unreasonably in doing so, for example by deducting the employee's entire wages until the overpayment has been recovered. Unreasonable conduct may constitute a fundamental breach of the implied term of trust and confidence between the employer and employee, entitling the employee to resign and claim unfair constructive dismissal, provided that he or she has the required continuous service.
What would be a reasonable rate of recovery will depend on the circumstances. For example, if the sum is relatively small, one deduction or payment may suffice. If, however, the sum is significant, it may be appropriate for the overpayment to be recovered by a series of deductions or payments.
The employer should discuss with the employee what would be a reasonable and realistic programme to achieve repayment, while avoiding financial hardship to the employee.