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Are You Paying Your Employees Too Much?

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Naturally some employers may feel that they pay their staff too much and equally naturally some employees would no doubt disagree. However most employers will be aware of what they are actually paying their employees - at least that's what you might think.

What would happen if it became apparent that you were paying an employee nearly double his or her salary? Would you be able to claim it back from the employee? A recent ruling from the Employment Appeal Tribunal in the case of Keenan v Barclays Bank Plc suggesting that the answer is perhaps not, will come as an unwelcome surprise to business leaders everywhere.

In this particular case the employee worked part-time for a building society. In 2006 her employment transferred to a 'new' bank after a merger. Following the transfer the employee received a statement from her 'new' employer mistakenly stating that her annual salary would be £17,000 - quite a significant increase on her previous salary of £9,500.

The pay discrepancy came to the attention of the employer following a financial review, who then sought to recover the overpayment and reduce the employee's salary to the previous rate.

The Employment Appeal Tribunal held that the employer was bound to continue paying the higher salary. The issue of recovery of the overpayments made since 2006 was not put before the Employment Appeal Tribunal as the employer conceded that they would be unable to recover this sum.

Although this decision is obviously not music to employers' ears, it may well be the exception rather than the rule. In this particular case the employee genuinely believed that she would receive a pay rise that she regarded as substantial and overdue and the employer had had the opportunity the review or query the salary but failed to do so.

The moral of the story is that employers should vigilantly check that they are paying the correct wages - particularly where a business has 'acquired' employees following a business merger or acquisition and/or wages that involve part-time employees.

Paul Grindley can be contacted on (0113) 399 3424 or paulgrindley@keeblehawson.co.uk.

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