Thank you for clarifying. If someone has genuinely been overpaid by their employer, then that is not money to which they are legally entitled and it should be repaid.
However, an employee may be able to use the legal defence of ‘estoppel’ to resist an employer's recovery of an overpayment. One of the main cases dealing with this is that of County Council of Avon v Howlett. The employee was a teacher who was paid more sick pay than he was entitled to. The teacher queried the overpayments with the employer but was assured they were correct. By the time the Council had realised their mistake, the teacher had spent most of that money. The Court of Appeal held that the defence of estoppel prevented the employer from recovering the whole sum of the overpayment.
The way estoppel operates is that if the following conditions are satisfied, then an employee should be able to use it as a defence to resist the recovery of an earlier overpayment:
- The overpayments were made due to an error by the employer
- The employee genuinely believed they were entitled to the money, or did not even realise that they were being overpaid
- The employee has since 'changed their position', meaning they have spent the money in question
So whilst there is nothing stopping an employer from pursuing a claim to recover an overpayment, if the above conditions are satisfied then an employee could raise the defence of 'estoppel' and prevent the claim for proceeding any further.
Now to answer your specific questions:
(Q 1) I brought this to light. Do I have to pay it all back in one go.
Not necessarily, it is possible to arrange a repayment plan with the employer, especially if you make it clear that this is all you can do at present and even if they were to sue you to get the full amount you are unlikely to be able to satisfy any court judgment and in the end it would still be repaid over a period of time rather than in one lump sum.
(Q 2) Do I have to tell HMRC ie Tax.
They will have to be informed because there would have been an overpayment of taxes so both you and the employer should be owed a rebate
(Q 3) Can I pay back a % only.
Yes as mentioned in the answer to Q1
(Q 4) Is this classed as my fault.
No, this is not your fault, especially as you asked them to check the figures and you were advised they were correct – this is the employer’s error, not yours
(Q 5) I retire Feb 2015 will I have to use my state pension to meet any outstanding debt.
That may be a possibility, but something only you will decide. You will obviously have to find the money from somewhere but whether it comes from your pension income o elsewhere is up to you.
A 6) I have money saved for retirement do I use that to pay out once and forget.
Again, that depends on you and how you wish to use that money. You could use part pension and part savings, or all pension or all savings – it really is up to you and how you wish to juggle your finances.