Amidst your many business transactions, you may have noticed you have accidentally overpaid your employee. It is important to understand that employees have rights that protect them from certain deductions in pay. However, a lawfully accepted deduction is when employers have accidentally overpaid employees. This means you have the right to contact your employee and reclaim your money.
Unlawful deductions of money
Employers cannot deduct money from their employees when it is for their personal benefit. They also cannot do so if the employee is under 18 years old. If there is a written agreement, it must be signed by a parent or guardian. Any deductions made must be in accordance to relevant agreements, the Fair Work Act and any awards in place.
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How to recover overpayments
You cannot deduct payments from an employees wages without informing them. This is unless there is a clause in the employment contract allowing for deductions in the case of overpayments. The first step in recovering your money is to contact the employee and inform them of the overpayment. Next, you should discuss the matter with them and ensure they agree to the repayment before you proceed. If they do, you should make a written agreement which sets out:
- The reason for the overpayment
- The amount of money that was overpaid
- How and how often the repayment will be made
The employee may decide that they will pay the full amount in one go or agree to a small deduction in wages per pay cycle. Usually if a big mistake has been made, the employee may be reluctant to pay a lump sum amount. You must consider all the terms and ensure that they are reasonable for both you and the employee.
What if my overpaid employee has left the company?
You are still entitled to claim your money for the overpayment even if the employee has left the company. This process may be more difficult if the final wages have already been paid to them. In this case, you may send an informal request for the money. If the employee does not agree to the repayment, you should seek legal advice. However, this may not be worth it because the legal fees may be more than the amount of overpayment.
Can the overpaid employee defend my reclaim?
The employee may reject your claim to the overpaid money because they genuinely believed they were entitled to it. This can occur in cases where the employee has spent the money in good faith such as to repay debts. As long as it wasn’t their fault, the employee does have a defence to your claim and may refuse you. In these cases, you should consider legal options carefully depending on your financial situation.
Don’t Forget…
Your employees are protected from unlawful deductions of money. However, overpayments are legal if you discuss the terms with your employee. They must agree to these terms before you start deducting money from them. This does not mean you will always be successful when you make these mistakes. So, be careful when you are making payments to your employees to avoid unnecessary conflicts. If you’re unsure as to whether you can reclaim overpayments or any other costs from your employee, you can contact an employment lawyer to see what your options are.
