Overpaid Employee for 3 Months: How Can I Fix This Salary Mistake?

In our company, the salary offered to an employee was Rs. 7000. By mistake, we paid him Rs. 9000 for the last 3 months. Please suggest a solution for this blunder. Kindly advise on the best course of action for rectifying this error. I am new to HR and would appreciate your guidance.

In our company, we offered Rs. 7000 to an employee. However, by mistake, we have been paying him Rs. 9000 for the last 3 months. What should we do now? Please suggest the best solution. If the director finds out about this error, he may fire me immediately. I am scared.

Talk to the employee to whom you have paid extra. If he agrees to return the money, then the problem will be automatically solved.

Human beings do commit mistakes. You can speak to your Director if he asks you about the same. As suggested by Mr. Prashant, kindly speak to the concerned employee so that he can return the excess amount. He has to accept it as his pay is informed to him, and the excess payment was made in error. Otherwise, inform him that the company needs to deduct the overpayment from his forthcoming salary.

You can talk to the concerned employee and clarify this with him in a transparent manner. You can tell him that this will be recovered from his salary. You can recover this in installments so that he gets a decent in-hand salary despite the recovery.

Warm Regards,
Gayatri P

Dear Adjustments of overpaid wages are permissible deductions under Section 7(2)(f) of the Payment of Wages Act 1936. Therefore, you are within your rights to adjust the overpaid amount from the salary next due. Whether the deduction is to be made in one go or in installments is to be decided based on humane considerations, and the employee should be informed of it.

There was a similar case wherein an employee who was on leave for one full month was paid that month's salary due to human error. When we discovered the mistake, we spoke to him, and he readily gave a written application intimating the erroneous credit of salary and a request to recover it over the next 4 salary periods, which was, of course, accepted. The recovery is being shown in his salary slip.

Since the employee falls within the purview of the Payment of Wages Act, 1936 in terms of his salary range, I endorse the reply of our learned member KK!HR. Regarding the recovery of the overpayment in a lump sum or equated monthly installments, care should be exercised while determining the installment amount to ensure that the total amount of deductions in a wage period does not exceed the percentage prescribed under section 7(3) of the Act.

@umakanthan53 Sir & KK!HR Sir,

If we get consent from the employee at the time of issue of advance that the total amount of Salary advance from the next wage cycle, can the employer deduct all salary advance at once? Even if it breaches Section 7(3) under the Payment of Wages Act?

Dear Prashant,

The principle is that there cannot be any legally valid agreement contrary to the law. As you mentioned, it is a violation of Section 7(3) of the PWA. Therefore, it is not valid.