By Charles Power

During the past week, I got an interesting question from a subscriber about overpayments made to staff, so I thought I’d share it with you today…

The question was this:

Thanks to a computing error, I have made overpayments to some of my staff. Can I make them repay the amounts?

So what is the answer?

Well, for starters, it depends on whether you have overpaid your current employees or your former employees.

Even though both current and former employees would legally have to pay you back the money if you demanded it, the process isn’t as straightforward as it may seem…

1. Current employees

If you have overpaid a current employee and they owe you a debt, you do not have the right to deduct the debt from their contractual payments or statutory entitlements (i.e. superannuation, annual leave amounts, etc.).

However, the employee can authorise you to deduct the amount of the debt from their net salary payments. It is important to do this to ensure that you do not infringe on their statutory entitlements such as superannuation and annual leave, etc.

In order to get this authority from an employee, you will need to write to (or email) them and advise them of the following things:

• the amount of their debt;
• the reason as to why this overpayment arose; and
• their re-payment options.

You should give the employee the option of repaying the debt directly by cash, cheque or EFT or by authorising you in writing to deduct the debt from the net amount of their next salary payment.

If an employee refuses to give you their authority, you are prohibited from unilaterally deducting the amounts. Instead, you will have to institute legal proceedings against them to recover the debt.

2. Former employees

If the employee refuses to pay back overpayment is a former employee, you will need to write to them and inform them of the debt. In this written communication, you should also request repayment of the debt within a specified time period (28 days would usually be reasonable) and advise the employee of their payment options.

If they do not repay the debt within the specified period (or refuse to repay it) you will need to institute legal proceedings against them in order to recover the debt.