24 Sep 2014

Recent reminder on recovery of overpayments


Employment alert email

Thursday 25 September 2014

The recent case of Ridge v Her Majesty’s Land Registry ("HMLR") serves as a useful reminder that any reduction to an employee’s wages in order to recover an overpayment must be itemised on a payslip.

Mr Ridge had exhausted his full sick pay entitlement but continued to have intermittent absences due to illness. During any month there would be some days Mr Ridge worked and for which he was entitled to pay and other days he did not work and therefore would not be entitled to pay. Where HMLR did not learn of or process Mr Ridge’s absences during the month in which they occurred he would be overpaid for that month and the overpayment would be corrected the following month by reducing his pay. Mr Ridge brought a claim arguing that by failing to fully explain the deductions on his payslip HMLR had failed to comply with its obligation under s.8 of the Employment Rights Act 1996 which sets out what is required to be included on an employee’s itemised pay statement. His claim was rejected by the Employment Tribunal on the grounds that the variations were adjustments, as opposed to deductions under s.8 of the ERA 1996, and therefore there was no requirement to provide an explanation on the payslip. This decision was overturned on appeal – the Employment Appeal Tribunal found that the recovery of overpayments in this way did constitute deductions from wages and the amount and purpose of the deduction should have been clearly identified in the payslip.

Employers should remember that if they wish to reduce an employee’s wages to recover an overpayment this must be properly itemised and explained in the employee’s payslip.