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Insights Public Law

Recovering Workplace Overpayments

Oct 05, 2023
3 min read
Recovering Workplace Overpayments

Recent media coverage has brought workplace overpayments into sharp focus, along with the circumstances in which such payments might be recouped. Workplace overpayments can occur for many reasons. However, they are usually due to human error at some point in the employer’s process. Examples include an administrative error in payroll processing of employees or miscommunications between that employee’s managers and the payroll function. Workplace overpayments are a common occurrence, in both the public and private sectors.

Are workplace overpayments common in the public sector?

Yes, there have been recent instances of such public sector overpayments in public sectors, both in Ireland and elsewhere. As well as recent examples in Ireland, overpayments at a publicly funded broadcaster in Australia's Northern Territory made headlines last year.

All salaries, wages, allowances and expenses paid to public servants are of course paid from public funds. Accordingly, public bodies are accountable for the appropriate use of such funds. For this reason and also due to the relative frequency of payroll errors, many public sector organisations have detailed administrative procedures in place for the recoupment of these overpayments[1]. Public servants will be aware of the Department of Public Expenditure and Reform’s Circular 07/2018. This circular details the procedure for, the recovery of such overpayments. In addition, Revenue has set out detailed guidance notes on the tax treatment on the recoupment of overpaid amounts by an employer from an employee.

How should a public body recoup a workplace overpayment?

Subject to a public body’s own policy document, like Circular 07/2018, we would generally recommend that an employer, in both public and private sectors, takes the following steps:

  • Notify the employee of the fact that an overpayment has been made, providing them with an explanation as to how this has arisen, together with a breakdown, including the dates and amounts.
  • Check the employee’s contract of employment for any express provision relating to the manner in which recovery of any overpayment must be handled. Usually, the overpayment is dealt with by way of deductions through the employer’s payroll system until the amount is paid off.
  • In the absence of any express contractual provision, consult with the employee with a view to negotiating a repayment plan. Considerations must be made where immediate recovery of the outstanding sum through payroll may cause the employee financial hardship.
  • Act fairly and reasonably through the process as the employee may have been wholly unaware that they have been overpaid, by virtue of an error by their employer.

What if the employee does not cooperate?

Most workplace overpayment issues are dealt with amicably, by way of deductions, or an ongoing repayment plan. However, there will be situations, such as the employee leaving or having left the public service, whilst owing sums, where those normal arrangements are not feasible. In such situations, the pursuit and management of overpayments may well fall outside the remit of the payroll operators within the public sector organisation. This is especially so where the employee is seeking to take advantage of the overpayment and refuses to pay it back, or simply won’t engage with the public sector employer at all.

In these situations, the next step is to escalate the recoupment effort to a collection agency or law firm, to liaise with the former public servant. This process should not be overly complicated or expensive. We have found that once traced and contacted, many workplace overpayment debts, are resolved by negotiation and collaboration. Litigation to recover overpaid workplace payments is always a last resort option. However, there may also be reputational considerations that merit litigation against the overpaid public servant, not least for reasons of public perception and its impact on other employee relations.

Comment

Workplace overpayment errors are common. However, the employee is obliged to repay the overpayment. In the public sector, there is usually a practice to recoup the overpayment. Where adherence to that policy does not yield repayment, it may be necessary to escalate the collection to experts in the field.

For more information, contact a member of our Debt Recovery team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] See for example the An Garda Síochána policy at https://www.garda.ie/en/inform...

People Also Asked

Can an employer legally deduct workplace overpayments from the salary/wages of a public servant?

In most cases, yes. However, the making of deductions from salary/wages is regulated. An employer may not make deductions from wages unless required by law, or provided for in the contract of employment, or permitted by the employee's consent.

Most contracts of employment and employer policies will have a provision dealing with overpayments and how they may be deducted from future salary/wages payable to that employee. The Payment of Wages Act 1991 affords an employer a legal right to recover any overpayment of wages, allowances or expenses from the salary/wages of employees.

How far back can an employer collect a workplace overpayment in Ireland?

Although employers should act promptly in seeking to recover a workplace overpayment, there may be scenarios where a historical overpayment only comes to light several years down the line.

In terms of time limits, the Statute of Limitations 1957 (as amended) will apply to provide that the employer’s right to do so will eventually become time barred. In the context of an overpayment of wages, the action is founded on the contract of employment and, therefore, a six-year limitation period will apply.

In other words, an employer will not be entitled to recover any overpayment of wages made more than six years ago.

What happens if the employee has left the workplace and refuses to pay back the overpayment?

An employer is legally entitled to recover any overpayment of wages, during the course of the employment relationship, as well as after the employee’s employment has ended. Obviously, it is practically more difficult to recoup the overpayment, if the employee has left.

Once any overpayment is identified, the employer should request repayment from the employee. This can be done informally at first, albeit in writing. If the employee refuses to repay the sum owed, or agree a repayment plan it is open to the employer to escalate the matter to a debt collection agency, or a law firm, to take further against the employee. This may culminate in litigation and enforcement by the employer. However, this is generally a last resort option, and most workplace overpayments are dealt with by agreement.



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