Why overpayment is a big issue for retail payroll and HR

In a fast-moving, dynamic sector like retail, change is frequent. Fluid shift patterns and high levels of staff turnover make overpayment an all-too-common occurrence in retail payroll.

One high-profile example saw a leading supermarket asking 200-300 former workers to return excess redundancy pay received after an administrative error.

As a gesture of goodwill, the company allowed employees to keep a proportion of the overpayment. Such goodwill gestures, although financially costly, are important.

Requests to return payments not only take up precious payroll time and resources; they are also rarely well received by employees.

A sudden request to pay back money may result in financial stress if the overpaid funds have already been spent inadvertently, for example. Most people have a number of direct debits set up to pay regular bills, and may not monitor their cash flow in detail.

Impact on retail employee engagement

In an industry where employee engagement is relatively low and staff turnover is high, negative experiences have real impact. As many as two in five (42%) retail workers already feel ‘overworked and underappreciated’.

The employee churn rate for retail stands at a huge 57.3%. That’s compared with an average of 15% across the economy as a whole. No wonder 98% of retail leaders are more concerned than ever about the impact talent shortages are likely to have on their business.

All this makes handling overpayment situations sensitively vital, to maintain positive staff relations, support retail employee engagement, and minimise disruption. Failure to do so can cause significant harm to the company’s reputation, both internally and externally.

Employers should be as transparent as possible about how errors occurred, how they are fixing them, and what steps will ensure they don’t happen again. Communication should come from senior leadership.

Reclaiming repayments: legal considerations

To make life easier for everyone, most employers include deduction clauses in their employment contracts. This means there’s no need to go to court to reclaim their money. Instead, they can agree to take the equivalent overpaid sum from an employee’s salary or wage, usually in instalments to minimise the impact.

This makes dealing with a difficult situation more amicable and less likely to end in dispute or conflict. But employers need to clearly itemise and log affected payslips with HMRC to make such deductions lawful.

How to get retail payroll right

To prevent such awkward situations from happening, it makes sense for organisations to have robust retail payroll software in place. Replacing manual processes reduces scope for human and compliance-related errors.

As the retail payroll software provider of choice to UK and Ireland market-leaders, Zellis offers a range of solutions and services tailored to the industry’s unique demands. As well as strong cloud software, we offer managed services, delivered by payroll specialists with decades of experience

Discover more about Zellis’ award-winning retail payroll software here.