They can occur when an employee leaves partway through a pay period, when commission or bonus payments are miscalculated, or when annual leave balances are incorrectly processed.
According to Sprintlaw UK, employers in the UK are legally entitled to reclaim overpaid wages, even if the error was their own. This right continues after the employee has left, providing the recovery is handled lawfully and fairly, yet many businesses write off these sums or are unaware that they can pursue them at all.
Public sector data highlights just how much can be recovered when the process is followed. Over a five-year period from 2019 to 2023, Aberdeenshire Council recovered almost £900,000 in salary overpayments, including sums reclaimed directly through payroll deductions and further amounts collected after issuing invoices to former staff.
One council’s results show just how much can be recovered when overpayments are dealt with quickly and handled in the right way. For organisations processing high volumes of payroll transactions every month, the opportunity to recover lost income could be far greater.
Many employers choose not to pursue overpayments believing there’s no legal recourse once the employee has left. Others worry about damaging relationships or attracting unwanted attention. In reality, reclaiming overpaid wages is both lawful and often straightforward when handled with care. As Citizens Advice points out, employers should notify individuals as soon as possible to explain how the overpayment happened and provide evidence of the calculation. This approach reduces disputes and supports a fair resolution.
Industries with high staff turnover tend to face this challenge more often than others. Sectors like telecommunications, finance and recruitment can process thousands of payroll transactions in a year, and overpayments that seem small on their own can become significant when they occur repeatedly across a large workforce. In large organisations, it is not unusual for the total owed by former employees to reach tens of thousands of pounds over time.
Having the legal right to recover overpayments is one thing, acting on that right with a clear process in place can deliver measurable results. At Redwood Collections, we’ve supported many employers dealing with similar situations. One national recruitment agency approached us after struggling to recover final salary overpayments from dozens of former contractors. Each amount was relatively small but together, they added up to tens of thousands of pounds. We worked with their finance team to put a clear recovery process in place and engaged with former staff in a professional and compliant way. Within weeks, payments that had seemed like a write-off began returning to their accounts.
In another example, a large telecommunications provider uncovered a backlog of overpaid wages caused by system errors during offboarding. Believing recovery would be too time-consuming, they had already written off part of the debt. By combining accurate documentation with a consistent communication plan, we helped them recover most of the outstanding amounts and introduced measures to stop the same issue arising again. These experiences show that overpaid wages can be recovered without damaging relationships, and that acting quickly makes a significant difference to the outcome.
The real value lies in making overpayment recovery a consistent part of your processes. Businesses that act quickly, keep accurate records and communicate clearly often see significant amounts returned that would otherwise have been written off. In high-volume environments, this can make a real difference to cash flow and ensures fairness across the workforce.
If your business manages a high volume of payroll transactions or has frequent staff changes, overpayments could be happening more often than you realise. The right systems and processes can turn those losses into recovered income, strengthening cash flow and easing pressure on your team.
If overpaid wages are adding pressure to your cash flow, our team can help you recover what is owed and put processes in place to protect your business in the future. Call us on 020 8080 2888 to speak to one of our experts.
You can also learn more about how Collections+ supports businesses in maintaining strong financial control in today’s economic climate by visiting our dedicated Collections+ page.
Our free eBook, Winning Solutions for High-Volume Debt Recovery, is available to download and offers practical advice for businesses managing a high volume of debts.
