Tesco Reclaims Redundancy Money

Tesco has admitted that hundreds of redundant workers were paid the wrong amount of redundancy pay. AND they wrote to those who were accidentally overpaid in an attempt to reclaim the money.

The practical difficulties involved in reclaiming small amounts of money from former employees have recently been highlighted by Tesco. They offered that anyone overpaid by less than £500 could keep their money. But those overpaid by more than £500, could only keep £100.

Where does an employer stand reclaiming money from employees?

The legal position with over-payment of wages is clear and distinct from other types of deductions. It allows employers to reclaim the money from future payments. However, if the over-payment is quite old or has become established as a regular occurrence, it’s not so clear-cut.

In fact, in the event of litigation, an employee might be successful in arguing a genuine belief in their entitlement to the money. As such, they may have spent it in good faith. It’s therefore advisable for employers to act quickly and always discuss an over-payment with their employees. We also recommend that employers agree to staggered deductions if the sum is more than trivial.

The position that Tesco is in is more difficult. Why? Because there are no future wages against which the over-payment can be offset. Instead, they’re in the awkward situation of asking those they dismissed, and who might be unemployed, to send them money.

A court may well rule in Tesco’s favour, but in many cases, the costs of getting that far outweighs the amount owed. So, it’s not just the prospect of poor publicity, but also good financial sense, that Tesco have written off the smaller payments and offered an inducement to those in receipt of larger sums.

It remains to be seen whether those former employees who were overpaid by just over £500 will be happy with keeping £100, when their former colleagues overpaid by slightly less, enjoy a much larger windfall.