22nd March 2016
Attempts by the MOD to recoup payroll overpayments from 200 Apache attack helicopter pilots have backfired completely, with the resignation of 15 pilots.
The fiasco has meant that the £829,000 owed will be dwarfed by the cost, estimated at over £52million, to train new pilots.
It raises the question of how payroll and finance teams deal with payroll errors and overpayments and the MOD, despite concerns over the impact of attempting to recover the debt, has continued to seek to recoup the overpayments.
Contributory factors to the scale and length of time the overpayments were made included complicated and contradictory rules, poor administration and overall communication.
Righting payroll errors and employee payments can be difficult, especially if the employee successfully claims that any overpayment is not recoverable. Multiple overpayments and the length of delay identifying the mistake make recovery a real issue, and the first step for any payroll team is to consult with those affected. If you don’t you could be in danger of claims of constructive dismissal.
So keep lines of communication open and aim to rectify the problem as soon as possible, or reach agreement with the individual concerned, abiding by employment law, payroll systems and HMRC corrections reporting.
Of course miscalculations and mistakes can occur. After all payroll teams are only human, right? Auditing and understanding your payroll can often take up valuable time and under pressure payroll teams, with the multitude of other things now to consider as part of the monthly payroll process, could find themselves on a downward spiral if they don’t get it right.
If you are looking to recover overpaid funds tread carefully and check what you can and cannot do under the Employment Rights Act
Employers must be thorough in their approach when rectifying an error, so as not to create a greater problem for the organisation and its employees. But you shouldn’t be gung-ho about making deductions that could be seen as unfair or unreasonable. After all you wouldn’t want a deduction from your own wages that would perhaps leave you unable to pay your mortgage, would you?
You’ll have to take a view when it comes to ex-employees. Recovery may be more difficult and you’ll need to consider whether legal action would be worth it, with legal costs and reputational impact to be considered.
Of course if you do have to go down the legal route to recover overpayments, tread carefully. There have been many court cases that have fallen in favour of the employee, with courts ordering that the overpayment is not repaid. From a reputation viewpoint this could be a recipe for disaster.
So before making any overpayment correction take a step back and consider the impact of the action, seek advice, and make sure you communicate effectively with everyone involved.
