A weekly column focusing on the legal labyrinth of company law, employment law and property law. This week, Paul Archer looks at the issue of overpaying wages to employees.

In businesses operating computerised payroll systems, it is not unusual for an occasional error to arise resulting in a mistaken overpayment to an employee.

It can sometimes be a matter of weeks or even months before the business realises that an overpayment has taken place.

In this situation, the legal question is whether they are entitled to recover the overpayment and, if so, by what means.

The Employment Rights Act 1996 provides that it will not be an illegal deduction from wages to recover an overpayment.

This means that an employer can deduct the overpayment from future salary provided that this is done reasonably over a period of time.

There is no fixed rule about the rate of recovery but there is an implied duty that an employer must not act in such a way as to undermine the employment relationship or breach trust and confidence.

In the light of this duty, the best advice for an employer is to discuss the overpayment with the employee and propose repayment over a reasonable period of time.

If the employee believes that the recovery of the overpayment from salary is unfair then the onus is on them to bring legal action to attempt to claim back the money that has been deducted.

This is a claim that needs to be made in the County Court and it is inevitably a rather complex and lengthy process.

In order to succeed in their claim the employee needs to show that three conditions have been met.

Firstly, it must be shown that the overpayment was the fault of the business and not the employee.

Secondly, it must have been reasonable for the employee not to know that they were being overpaid.

Thirdly, the employee must have acted to their disadvantage on the assumption that the payment of salary was correct (for example by spending the money).

The most common difficulty for employees is the second condition since it is often obvious when an overpayment has occurred.

For further information and advice on this issue contact Paul Archer, Lemon & Co Solicitors, on 01793 527141.