Whether you are an investment banker, a shop assistant or any other worker suffering unauthorised deductions from your wages, contact Cambridge Legal on 01223 776200 or email enquiries@cambridgelegal.co.uk We are specialist Cambridge employment solicitors serving the UK.

Employment contracts and pay

Your employment contract or “written statement of employment particulars” is required to say how much you are going to be paid. Pay must be at least the national minimum wage to avoid breaching the National Minimum Wage Act 1998. If you don’t have a written employment contract and have worked for your employer for more than two months you will be entitled to compensation. See our article “Employment Contracts”.

Unauthorised deductions from wages

The Employment Rights Act 1996 deals with unauthorised deductions from wages. “Wages” are widely defined as “any sums payable to the worker by his employer in connection with his employment, including any fee, bonus, commission, holiday pay or other emolument referable to his employment“. This includes guaranteed payments, statutory sick pay, adoption pay, paternity pay and maternity pay. If you reasonably expect to receive a discretionary or ex-gratia (“as a favour”) payment, this too is treated as wages. Commissions payable at the end of a worker’s contract in connection with the employment also count as wages.

If you receive significant remuneration by bonus, take note. There are a number of approaches we can take if your bonus has not been paid. The starting point is to look at a possible unauthorised deduction from wages based on your reasonable expectation of receiving payment.

Pension contributions to a pension provider, loans, advances on wages, expenses, pensions, allowances or gratuities in connection with the worker’s retirement, redundancy payments and benefits in kind do not count as “wages” for the purposes of the Employment Rights Act 1996.

What is a deduction?

An unauthorised deduction from wages occurs if any payment by an employer is less than the total amount properly payable. This is the case even where there has been a 100% deduction and nothing of what is owed is paid at all. In other words, non-payment can be a deduction.

The money deducted is recoverable through the employment tribunals. This can include statutory sick pay, maternity pay and accrued holiday pay.

When can your employer make deductions?

Employers are not allowed to make deductions from wages unless they were:

authorised by statute such as PAYE tax and National Insurance payments, or payments such as maintenance or fines ordered by a court;
authorised by a provision in the employment contract. The test here is whether or not your employer informed you about this right to deduct money before doing so. Obviously, if you have a written contract that specifically gives this permission then you will be deemed to have had notice;
previously agreed in writing between you and your employer.

The three situations above are examples where there has been prior permission for the employer to make the deduction. Consent to the contractual agreement or deduction can’t be retrospective – after the event leading to the deduction. This stops your employer from demanding payment and immediately forcing you to give consent. The rule is that they simply cannot make deductions unless they have had one of the three forms of prior consent. An unauthorised deduction from wages is clearly where there is no consent.

Even if none of the three conditions is satisfied, your employer may still be entitled to deduct money in the following limited circumstances:

Because of your involvement in a strike or industrial action
Because of a contractual obligation to pay a third party (social club membership fees, union fees, pension contributions, charitable donations)
To pay a court or tribunal order where you have to pay your employer and have given prior written consent
Because of an error in computation (this excludes your employer’s conscious decision not to make payment – because this is not an error)
Where your wages or expenses have been overpaid

Overpayment

You won’t be able to claim an unauthorised deduction from wages if your employer has merely tried to recover an overpayment of wages. This applies regardless of whether your employer miscalculated the overpayment. If there is a dispute about whether or not there has been an overpayment, this is a matter to be decided by an employment tribunal.

Even if you accept that the money was overpaid by your employer you may still be able to prevent repayment. If you are able to show that you relied on the overpaid sum, did not realise that it had been overpaid, and altered your position as a result of receiving that money by, for example, spending it – there may be a legal argument that you do not have to repay. This is a complex area of law and requires advice from specialist employment solicitors. Please contact Cambridge Legal for immediate advice.

Retail workers and deductions from wages

Cash and stock deficiencies are a common problem in retail. Employment law provides special protection for retail workers. Retail employment is employment that involves carrying out retail transactions directly with members of the public in the collection by the worker of money payable in connection with the sales transactions. Those who work in banks, building societies, petrol stations, restaurants, who collect rent or who deliver goods are included.

An employer can make deductions from a retail worker’s wages for cash or stock deficiencies if there is prior contractual provision for this. Even then, the most that an employer may lawfully deduct from a retail worker’s wages is 10% of the gross wage due on any particular day. The employer can only continue to recover up to 10% of the gross wage in the following weeks until the full sum is recovered. Any amount still outstanding in the worker’s final week of employment may then be recovered.

Deductions from wages because of cash shortages or stock deficiencies cannot be made more than 12 months after the employer discovers, or ought reasonably to have discovered, the shortage.

Historically, the worst abuses involving unauthorised deductions were by garage owners who held workers responsible for underpaid fuel bills which were in excess of the wages owing. Effectively, the employee had to pay for the privilege of working.

Remedies for unauthorised deductions from wages

Never underestimate the power of a well drafted letter before claim from a specialist employment solicitor. Cambridge Legal will certainly be happy to write to your employer offering an opportunity to resolve the problem. If this fails, we will take the matter to the next stage which involves the employment tribunals or court.

As with all claims, you need to be mindful of the limitation period for unauthorised deductions from wages. An employment tribunal claim must be made within three months of the date of the deduction. If you have left your employment, the three months can run from the date of your final payslip or payment, even if that was sent sometime after the termination date.

If there has been a series of deductions the time limit runs from the date of the last deduction. It may be that deductions have been made for many months and well in excess of three months. If so, the position remains that the time runs from the date of the last deduction in that series.

Since 2009 it has been possible to obtain financial compensation for any further financial loss attributable to the unauthorised deduction in wages. This means that you can not only recover the money that shouldn’t have been deducted in the first place, but also compensation for the inconvenience of that unauthorised deduction.

A related action for breach of contract may also be appropriate in either the employment tribunals or, if it is above £25,000, in the County Court or High Court. Seek advice from specialist employment solicitors.

Video

Here is a brief video we made with independent trade union representatives, Castle Associates about what is meant by unlawful deductions from wages.

https://castleassociates.org.uk/ask-the-expert/watch/what-unlawful-deductions-wages

Contact specialist employment solicitors

For further information on unauthorised deductions from wages or any aspect of employment law, particularly if you are looking for specialist employment solicitors in Cambridge, call Cambridge Legal on 01223 776200 or email enquiries@cambridgelegal.co.uk

“I have long been of the opinion that if work were such a splendid thing the rich would have kept more of it for themselves”. Bruce Grocott