It is unlawful for an employer to make a deduction from a worker’s wages unless the deduction is required or authorised by statute or a provision in the worker’s contract or the worker has given their written consent to the deduction.
What are wages?
Wages means ‘any sum payable to the worker in connection with his employment’. This includes:
- Any fee, bonus, commission, holiday pay or other payment referable to the worker’s employment;
- Certain statutory payments including sick pay, maternity pay, paternity pay, adoption pay and shared parental leave pay.
Certain payments are excluded from the definition of payments, such as:
- Advances of wages or payments under a loan agreement between worker and employer;
- Payment in respect of expenses incurred by the worker in carrying out their employment;
- Any payment by way of pension or allowance in connection with the worker’s retirement.
What is a deduction from pay?
Where the total wages paid to you on any occasion is less than the net amount of wages ‘properly payable’ on that occasion, the deficit, generally, counts as a deduction. Whether wages are properly payable will involve an assessment of the contractual position.
If your employer reduces your wages without contractual authority or without your individual consent you can:
- Accept your employer’s breach of contract and resign and claim constructive dismissal; or
- Work under the new terms under protest and bring a deduction from wages claim for the ongoing loss as a series of deductions.
Generally speaking, you are entitled to receive your wages in full at the time they are due, so if payment is late, this counts as a deduction.
When there is no protection from deductions from wages?
There are a number of express cases when the unlawful deductions regime gives no protection from deductions. Examples include:
- Overpayment of wages or expenses or failure to make repayment of expenses. Deductions can be made by your employer in respect of an overpayment of wages or expenses;
- Payments to third parties. Deductions payable to third parties (for example, your contributions to a pension scheme or trade union dues) made either pursuant to a contractual term or otherwise with your prior written agreement or consent;
- Court order. Deductions made to satisfy an order of a court or tribunal for the payment of an amount by you to your employer, provided you have given your prior written consent.
When are deductions from salary permitted?
Assuming none of the exceptions apply, a deduction from wages can only be made if one of the following applies:
- It is required or authorised by statute. For example deductions for income tax and national insurance contributions under the PAYE system;
- It is required or authorised by a relevant provision under your contract. The provision must make it clear that the deduction may be made from your wages. Any provision which is simply a penalty clause will be unenforceable.
- You have given prior written consent. The written consent must be given before the event giving rise to the deduction, not just before the deduction itself.
Remedies
Your remedy for an unlawful deduction from your wages is via a claim to an employment tribunal. You can seek a declaration, claim payment of the sum unlawfully deducted and in some cases compensation for further financial loss, for example, you may be able to recover bank charges or interest if the deduction caused your account to be overdrawn.
Time limits
Subject to the rules on ACAS early conciliation, you must bring a claim within three months beginning with the date of payment of the wages from which the deduction was made. Where you complain about a series of deductions, the time limit begins to run with the last deduction in the series.
A tribunal may still consider a complaint presented outside the time limit if it is satisfied that it was not reasonably practicable for you to present the claim before the end of the three-month period and that you presented it within such further period as the tribunal considers reasonable.
There is a two-year ‘back stop’ limiting the amounts that can be recovered in most unlawful deduction claims.
Lincs Law Employment Solicitor Can Help You
If you have had money deducted from your pay, please contact on 01522 440512 for a free consultation. Alternatively, for more information about pay issues, please our website https://lincslaw.co.uk/services/employees/workplace-problems/pay-issues/
Kathryn Bolton
Specialist Employment Law Solicitor
LincsLaw Employment Solicitors
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