If an overpayment has occurred, in order to deduct any amount from an employee, you must ensure that written consent is given by the employee. The only deductions that can legally be made from an employee are those pertaining to PAYE income tax deductions. Employers need to mindful that there are special rules regarding the deduction or withholding of monies from workers’ wages.
When notifying employees of overpayments, or where an employee does not consent to a deduction being made, it is a good practice to explain that an administrative error has taken place in processing their pay but, as a sign of good faith, these amounts will not be recouped. Employees should however, be notified that their rate of pay will be reduced to reflect the correct amount in future pay cycles. It is often useful to point to the particular source of wage information applicable to them (e.g. modern award, enterprise agreement, contract of employment etc.) to assist in explaining the correct rate of pay.