Recovery of wages should be fair and reasonable
There is very little case law on recovering overpaid wages. The usual way is for the employer and the employee to agree on the amount to be repaid and the payment schedule. Photo: Gettyimages.
What happens if an employee is paid too much in wages? PAM’s lawyer Henry Vähtäri tells what you should do if you are paid too much.
If all of a sudden an amount appears in your account that is more than you are usually paid, it might be a mistake by your employer.
Nowadays it’s common for payroll services to be outsourced, so overpayment of wages could be due to human error. It could be, for example, that the payroll people haven’t noticed an employee’s work tasks have changed and therefore their wages are different.
It’s very important that employees check their pay slips every month and report any problems to their employer. So it’s not enough just to check the net amount you have coming in.
According to PAM’s lawyer Henry Vähtäri, this is something that occasionally crops up in PAM’s employment advice service.
“Many people might mistakenly think that you can keep overpaid wages. But this isn’t the case. Employers are entitled to recover overpaid wages”, Vähtäri says.
It doesn’t matter whether the employee hasn’t noticed that wages have been overpaid. This is what is called an unjustified advantage and must be returned. It’s a bit like transferring money to the wrong bank account by mistake.
In practice overpaid wages are usually deducted from the next wage payment. If it’s a large sum, the overpaid wages cannot be deducted from the wage payment all at once.
“If wages have been overpaid over a long period, the amount that has built up can be considerable. For example, 40 euros a month doesn’t sound like much, but over a couple of years it’s almost a thousand euros”, he points out.
In a case like this, it’s reasonable to agree a long enough repayment period for the overpaid amount. You can also negotiate with your employer, either yourself or with your shop steward, to get the amount reduced. According to Vähtäri, you can sometimes negotiate a better outcome by arguing that the mistake had nothing to do with the employee and was due to, for example, human error at the payroll service.
The protected amount must be taken into account in wage payment if an employee is subject to distraint
The debtor must be left with the so-called protected amount in their wage payment. The protected amount is always higher if the employee has dependent underage children. As of 2020, the protected amount for a person living alone is: € 678.90 /month and for a person with family (one child): € 922.50 or € 1166.10 (two children) etc. If an employee earns less than the protected amount in a month, overpaid wages cannot be recovered from pay that month. You can find more detailed information on protected amounts and how they are calculated in different situations on the enforcement authority’s website.
“Employers have mostly been sympathetic that employees need to get by on their wages, so usually long repayment periods have been agreed”, Vähtäri adds.
When it comes to recovery of overpaid wages employers must also consider if the employee has debts and if their wages are subject to distraint. Under Chapter 2, Section 17 of the Employment Contracts Act, an employer may not set off pay payable to an employee against counterclaims in so far as this is exempt from distraint under the Enforcement Code.
“In other words employers must comply with the same rules as the enforcement authorities on the distraint of pay. That provision in the Employment Contracts Act is compulsory”, PAM’s lawyer stresses.
As a rule, an employer can set off a third of an employee’s pay. The employee must, however, always be left with at least the protected amount defined in the Enforcement Code.
”In other words, if an employee earns less than the protected amount in a month, overpaid wages cannot be recovered from pay that month”, Vähtäri says.