Can You Recover Overpaid Wages?

Sometimes an employer overpays an employee and wants to recover the payment. This is possible but only in certain circumstances.

If the overpayment is a result of a mistake at law, then the employer cannot recover the overpayment. This occurs where the employer has misinterpreted the pay requirements, for example, misreading or misinterpreting an award provision. In such a case the overpayment is the employer’s responsibility due to their own error, and the employee should not be disadvantaged.

However, an employer may recover the overpayment if there is a mistake of fact. For example, you pay a junior employee as an 18-year-old, but they are only 17, or you pay them for 3 hours overtime when they have only done 2 hours. In these circumstances an employer can recover the overpayment.

In doing so the employer should talk to the employee and discuss the mistake and a satisfactory method and time frame for recovering the overpayment.

It should be borne in mind that an employer cannot make deductions from an employee’s pay without consent, preferably in writing, and that would apply to recovering an overpayment.

There is often a fine line between a mistake at law and a mistake of fact, so it is best to get advice first. Contact Andrew if you think you have made an error in paying your staff.