Friday 26th September 2014
The EAT has held that the recovery of an overpayment previously made to an employee via the payroll is a deduction under the Employment Rights Act 1996. As well as requiring prior authorisation, the deduction must be specifically and clearly itemised on the employee’s payslip.
In Ridge v Her Majesty’s Land Registry, Mr Ridge was unwell and took periods of sickness absence. He was paid on the last day of the month by bank transfer and his payslip stated his gross pay (comprising basic salary and an allowance) and listed any deductions made in that month, for example for income tax. Once Mr Ridge exhausted his occupational sick pay entitlement, his pay was adjusted for further absences. Depending on when these absences were processed, Mr Ridge’s gross pay was either lower in the month the absence occurred, or minus entries were made the following month to correct the overpayment. Mr Ridge complained to HMLR that his payslip did not satisfactorily explain the pay adjustment. He then issued ET proceedings alleging a failure by HMLR to provide him with a properly itemised pay statement in accordance with its obligation under s.8 of ERA 1996.
The ET rejected the claim, finding a distinction between deductions from pay, which must be itemised, and adjustments, which need not be. However, the EAT has now overturned the decision, meaning that a reduction to claim back a prior overpayment must be clearly itemised on the payslip as a deduction from pay, including the reason and amount.
All information in this update is intended for general guidance only and is not intended to be comprehensive, or to provide legal advice.