The Employments Rights Act 1996 dictates the circumstances in which an employer can and cannot deduct wages from a worker’s salary or an employer may receive a payment from a worker. There are only three circumstances in which an employer can deduct money from wages:
- It is required by law (for example, income tax, national insurance contributions);
- The deductions are authorised in the employment contract;
- The employee has provided written consent that the deductions may be made.
Wages include (non-exhaustive list)
- Any fee, bonus, commission, holiday pay or any other emolument under the worker’s contract of employment
- Statutory sick pay
- Statutory maternity pay
- Statutory paternity pay or additional statutory paternity pay
- Statutory adoption pay
- A guarantee payment
If an employer withholds an employees wages for one of the following reasons this may amount to an unlawful deductions of wages:
- Withholding notice pay
- Withholding overtime that the employee is entitled to
- Withholding a contractual bonus
- Withholding redundancy pay
- A retail employee has wages docked to cover cash shortages in the till or missing stock
- If an employee has been overpaid and the employer makes unreasonable deductions from wages, without permission, to correct the overpayment (rather than taking smaller amounts over a longer period of time)
If a worker considers they have suffered an unlawful deduction from their wages they can bring a claim before the Employment Tribunal. The worker can seek a declaration and repayment of the sum unlawfully deducted. In in some cases the worker can seek compensation for further financial loss, for example bank charges suffered due to the deduction.
However, unless the employment contract stipulates otherwise an employer may be entitled to deduct money from wages in the following circumstances.
- If the employee is late work for work
- If the employee takes a day off work that has not authorised. For example, if the employee has not properly booked a day’s leave
- If an employee is unable to get attend work because the roads are blocked by snow.
- If an employee to attend work because you have to attend to an emergency at home. For example, a flood.
General time limit
Time limits in the Employment Tribunal are very strict. Aclaim must be brought within three months beginning with the date of payment of the wages from which the deduction was made; or if it is a payment to an employer, the date the employer received the payment. Where there is a series of deductions or payments, the time limits run from the last deduction or payment in the series, or the last of the payments received. All time limits are subject to the rules on the automatic extension of time for ACAS early conciliation.
If you are unsure whether a deduction is lawful, please get in touch. Our team is well versed in advising on all elements of wage disputes, including the unlawful deduction of wages.