Overpayment notification letter template
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Our Overpayment Notification Letter Template addresses overpayment errors promptly, ensuring clear communication and resolution for all parties involved.
Why this letter is necessary
A salary overpayment letter informs employees of excess payment and repayment terms. It may suggest repayment methods and highlight legal obligations. Prompt and fair handling of overpayments helps prevent legal or financial issues, promoting employee understanding and corrective action.
Compliance notes
As soon as an overpayment is identified, you should take action as possible. This would involve raising the issue with the employee to explain how you intend to recover the money, usually by deducting from the employee's future salary payments until the amount is paid off.
Here are some UK employment legislation considerations to keep in mind when implementing an overpayment notification letter:
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Under the Employment Rights Act 1996, employers must ensure that any deductions made from an employee's pay are lawful and do not take the employee's pay below the national minimum wage.
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Employers must follow the principles of natural justice and fairness when dealing with overpayments. This means giving the employee an opportunity to respond and challenge the overpayment before any deductions are made.
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The letter should include clear and concise information about the amount of the overpayment, the reason for the overpayment, and how the employee can repay the amount.
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Employers should be aware that some employees may have the right to set off the overpayment against any money owed to them by the employer. This should be taken into account when calculating any deductions.
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If the overpayment is due to an error made by the employer, the employer should consider waiving the overpayment if it would cause financial hardship to the employee. However, if the overpayment is significant, the employer may need to recover the overpayment to avoid a loss to the business.
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Employers must keep accurate records of any deductions made from an employee's pay and provide a payslip that clearly shows the amount of any deductions.
Workflow sequence
Pay or salary payment arrangements policy
This model policy template provides information regarding pay or salary payment arrangements.
Implementation timeline
| Step | Description | Responsibility | Timing (Days from Overpayment) |
| 1 | Identify Overpayment: Identify the overpayment made to the employee through payroll records and financial analysis. | HR / Payroll Team | N/A |
| 2 | Verify Overpayment: Cross-check the overpayment with relevant data and verify the accuracy of the excess amount. | HR / Finance Team | Day 1 |
| 3 | Calculate Repayment Amount: Determine the exact amount of overpayment and calculate the repayment sum accurately. | HR / Finance Team | Day 2 |
| 4 | Prepare Overpayment Notification Letter: Create a comprehensive Overpayment Notification Letter, stating the reason for the overpayment, the amount to be repaid, and the repayment options. | HR / Management Team | Day 5 |
| 5 | Issue the Overpayment Notification Letter: Deliver the Overpayment Notification Letter to the employee, officially informing them of the overpayment and requesting repayment. | HR / Management Team | Day 7 (Or as deemed appropriate) |
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Specifications
5 mins
289 words, 2 pages A4
1 December 2024
[Company name]
[Sender address]
[date]
[Recipient name]
[Recipient address]
Dear [Recipient first name],
Overpayment of salary
I am writing to inform you that, due to an administrative error, you have been overpaid in the sum of £[amount] per [week/month] for the last [number] [weeks/months].
The total overpayment is therefore £[amount].
In accordance with section 14(1) of the Employment Rights Act 1996, the Company now wishes to recover from you the sum that you have been overpaid by deducting the overpayment from your wages. However, at the same time, the Company does not wish to cause you any financial hardship. Consequently, we would propose that deductions are made from your wages for the next [number] [weeks/months] at the rate of £[amount] per [week/month] in order to recover the overpaid amount.
Please confirm your acceptance to these deductions from wages by completing the attached acceptance slip and returning it to [name] as soon as possible and in any event by no later than [date].
If you wish to discuss any aspect of this letter, including an alternative payment schedule, please speak to [name].
We should advise you that, because the purpose of the deductions is to recover an overpayment of wages, the Company does not actually need your consent to the making of the deductions. Therefore, if you fail to complete and return the attached acceptance slip or fail to speak to [name] to agree an alternative repayment schedule, the Company reserves the right to make deductions from your wages over a shorter period of time than that outlined above in order to reimburse itself in respect of the overpayment.
I apologise for any inconvenience caused.
___
Agreement to repay overpayment
[number] [weeks/months] at £[amount] per [week/month]
| Signed (employee): | |
| Date: |
Yours [faithfully | sincerely],
[Sender name]
[Sender job title]
[Sender telephone]
[Sender email]
[For, and on behalf of [Company name] ]
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