Rights Concerning the Payment of Wages (Unfair Deductions)
Your employer has no automatic right to make unauthorised deductions from your pay – even if you have been overpaid. Some deductions, such as tax and national insurance, are classed as authorised – your permission is not required! You should as a general rule be paid any money you have earned.
Further if your Employer fails to make a payment that was expected by you, for example a Christmas Bonus that you have had for a number of years, this could also be classed as an unfair deduction. In other words it does not actually have to be a deduction, just a failure to pay wages, holiday pay, commission or bonus, that you think is due to you.
It is fundamental to any employment relationship that the employee carries out work for the employer and in return the employer pays for that work. In order for you to be entitled to pay, you must actually undertake your duties, or be ready and willing to perform them. Your contract should tell you how much you are due to be paid. In addition you are entitled to receive a statement of your pay and basic terms, from your employer, within 8 weeks of starting work.
There are special provisions relating to wages which are aimed at ensuring that employers do not withhold or make deductions from wages without authorisation. Legally, an employer is not permitted to make any deduction from your wage or salary unless it satisfies one of the following conditions:-
- The deduction itself is authorised or even required by Statute, for example, the deduction of National Insurance Contributions, a Court Order or tax via the PAYE system. If you think this amount is not correct, contact your local Inland Revenue office.
- The deduction is authorised to be made by any relevant provision in your employment contract. In other words, you have accepted that this deduction can be made, because it is in your contract of employment.
- You have given permission to your employer to make a deduction for a specific matter, perhaps union subscriptions, training costs, relocation costs or social club membership.
- Wages are fairly broadly defined. This will include any sums payable to you in connection with your employment, this would include basic wages or salary, bonuses, commission, holiday pay, Statutory Sick Pay, Statutory Maternity Pay etc.
There are some general exceptions and these are as follows:-
- Any overpayment of wages. Your employer has no automatic right to claw back an overpayment of wages, but the contract may allow this.
- Deductions in connection with disciplinary proceedings, if this is covered in the contract of employment.
- Any statutory obligations to pay specified monies to a statutory authority (as mentioned above, tax and National Insurance).
- Any contractual agreements to pay over amounts to a third party (for example, union subscription deductions).
- Certain jobs, which involve handling cash, (such as shop work) allow the Employer to make deductions for cash shortages. The maximum deduction allowed from your pay packet is 10% of your wages on each pay day. This 10% is from your gross pay, that is before tax and national insurance is deducted – refer to your employment terms for more detail.
Participation by the worker in a strike or other industrial action – if you take part in a strike, or a work to rule for example, your employer can deduct pay without your permission.
If you believe that your employer has made an unlawful deduction, or failed to pay you an amount you are due, you can bring a complaint to a Tribunal. If you need further help Contact our Advice Line.
You should note that the term “deduction” has been given a wide interpretation by the Courts and can include the non-payment of pay, the non-payment of a pay rise, shift payments or other cash additions to which the employee feels entitled. If your employer has, without notice or agreement, stopped paying you a bonus or shift allowance – this can still be classed as a “deduction” from your wage. It may even cover a pay rise you feel entitled to. If you think this has happened to you, contact our helpline for further advice.