Recovering a salary overpayment or training costs from a former employee: what the law allows and how to find them

While they work for you, and after they leave

During employment, the Employment Rights Act 1996 lets an employer deduct an overpayment of wages or expenses from later pay: section 14 takes those deductions outside the usual protection against unlawful deductions from wages. Training costs are different. A deduction for them is lawful only if a term of the contract allows it, or the employee agreed to it in writing beforehand, which is why training agreements are normally signed before the course starts.

Many employers recover what they can from final pay. Whatever is left once the employee has gone is an ordinary debt. You ask for it, and if you are not paid you claim it through the courts. The employment tribunal is not usually the place: an employer can bring a contract claim there only as a counterclaim to one the employee has brought.

Is the money recoverable?

Overpayments

Money paid by mistake is generally recoverable, whether the mistake was a payroll error, pay after a leaving date or an allowance that should have stopped. The employee may have a defence if they received the money in good faith and, relying on it, changed their position so that repaying would be unfair, or if the employer led them to believe the money was theirs. Small, long-running overpayments that the employee had no reason to notice are where those arguments are strongest. Explain the error plainly and show the calculation.

Training costs

A repayment clause is likely to be enforceable if it was clearly agreed before the training, is reasonable in amount and protects a genuine interest of the employer rather than penalising the employee for leaving. Clauses that reduce over time, such as a fixed share written off for each month the employee stays, are the usual pattern and are easier to defend than one that asks for the full cost however long the employee stayed. Where the training was a requirement of the job, take care with deductions from final pay: HMRC's guidance is that such a deduction reduces pay for National Minimum Wage purposes, so it must not take pay for the final period below the minimum wage.

Start with the personnel file

An employer usually holds more than enough to find a former employee: full legal name, date of birth, the home address they gave, earlier addresses from the application, a personal phone number and email address, and sometimes the name of a new employer from a reference request. Use what you hold, with care:

• Write to the last home address, and email the personal address, with a short, factual request for repayment.
• Try the personal phone number.
• Do not raise the debt with a new employer, even if you know who it is. That discloses the former employee's affairs to a third party.
• Do not use emergency contact details to pursue the money. They were given for emergencies, and using them to chase a debt is unlikely to be a fair use of that information.

If letters come back or go unanswered, and there is reason to think the employee has moved, find the current address before the formal letter of claim.

The letter of claim and the Pre-Action Protocol

A former employee is an individual, so a business claiming money from them is likely to be bound by the Pre-Action Protocol for Debt Claims. That means a letter of claim setting out the amount and how it arises, with the information sheet and reply form the Protocol requires, and 30 days for the employee to reply before you issue a claim. If they say they cannot pay in one go, consider instalments: a debt recovered at a modest monthly rate is usually worth more than a judgment against someone with no means.

The letter has to reach them. Sent to the address they have left, it gives them no chance to respond, and the court may later ask what you did about that. Checking an address is current before a letter before action explains the checks.

Time limits

Under the Limitation Act 1980 a claim for a debt under a contract, such as a training agreement, must generally be issued within six years of when the money fell due. For money paid by mistake, the six years may run from when the employer discovered the mistake, or could with reasonable diligence have discovered it, which helps where an overpayment came to light late. Take advice if the dates are close rather than relying on that.

Making the claim

A claim for a fixed sum can be issued online, and a claim of up to £10,000 is normally dealt with on the small claims route, where each side usually bears its own legal costs. The claim form goes to the former employee's address, so the rules on service apply: if you have reason to believe they have moved, you must take reasonable steps to find the current address before serving at the old one. Finding a defendant's address for a small claim covers that in detail. Ask your payroll provider separately how a repayment should be treated for tax and National Insurance.

Tracing the former employee

Recovering money owed under an employment contract, or paid by mistake, is a legitimate interest under UK GDPR, and the purpose is recorded against every instruction. The minimum to start is the full legal name plus a date of birth or a previous address, and an employer has both. Add the personal phone number and email address.

Trace Bureau cross-references more than 150 sources, registers and records, a private investigator checks and verifies the result, and you receive a dated PDF report with the former employee's current registered UK address and a confidence rating: Confirmed, Probable or Possible. The former employee is not told who instructed the trace. Standard is £150, delivered within 3 to 5 working days; Priority is £200, delivered within 2 to 3 working days. As an organisation you receive the matter reference on the report, a signed statement on request and a free re-check within 60 days, and employers with ten or more leavers a month to find can open a firm account at £120 per trace. There is nothing to pay when you instruct. Your card is only saved, and it is charged only when a private investigator has verified a current address. Not found, no fee.

When it is more than a debt

If the overpayment or the missing money looks deliberate, such as false expense claims, pay changes the employee made to their own record, or company property that left with them, the question is no longer only where they live. Report suspected theft or fraud to the police. Our sister service, Investigation Bureau (investigationbureau.uk), handles workplace and fraud investigations, asset tracing and process serving. Trace Bureau only finds addresses.

When to instruct a professional trace

Instruct when the former employee has not answered at the address you hold, when post comes back, or before the letter of claim if you have any reason to think they have moved. Instruct a trace online in about five minutes, or read tracing a debtor before court for the wider sequence.