The EAT’s decision in Ridge v Her Majesty's Land Registry provides a practical lesson for employers about the correct method which must be adopted when recovering a previous overpayment of wages, so as not to fall foul of S.8 of the Employment Rights Act 1996, which gives employees the right to receive a written itemised pay statement containing, among other items, particulars of any deductions from gross pay and ‘the purposes for which they are made’.

HMLR’s payslips set out the gross pay on one side and list specified deductions from pay such as income tax and NI contributions etc., on the other side. Because of the way the pay system operated, overpayment situations arose when Ridge exhausted his entitlement to full sick pay, but still had spells of absence. Overpayments in one month would be corrected by making minus entries against gross pay, but with no details. Ridge complained that HMLR was in breach of S.8 ERA 1996 as his payslips contained no explanation for the deductions.

A tribunal rejected Ridge’s claim on the basis that the variations to his gross pay were adjustments according to the time he actually worked in each month and therefore were not deductions. Wrong, said the EAT. If an employer reduces an employee's wages to recover an overpayment, it is making a 'deduction' from wages and S.8(2)(b) ERA 1996 requires the employer to identify the amount and purpose of the deduction on the payslip. The aim of S.8 is to ensure clarity in the way wages are calculated and that cannot be achieved by making adjustments to gross pay and not providing any explanation. However, a declaration in Ridge’s favour was “plainly a sufficient remedy”. 

Although this case involved a relatively minor aspect of the statutory landscape, it nevertheless progressed through both the tribunal and the EAT because of the principle involved. If an employee’s gross pay needs to be reduced for a valid reason then the amount and the reason need to be clearly set out in the deductions column on the payslip.

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