Unlawful deductions from wages – Your rights
Your employer may fail to pay money owed to you. You have certain legal rights to recover this money. The law protects individuals from having unauthorised deductions made from their wages, including complete non-payment. This protection against unlawful deductions from wages, applies both to employees and to some self-employed workers.
In certain instances your employer is lawfully allowed to make deductions from your wages.
However you should note that one of three conditions has to be met:
- Required or authorised by legislation (for example, income tax or national insurance deductions)
- Authorised by the worker’s contract – provided the worker has been given a written copy of the relevant terms or a written explanation of them before it is made
- Consented to by the worker in writing before it is made.
There are some exceptions where a deduction will be lawful, such as if you were previously overpaid or where you have taken part in a strike or industrial action.
In retail or in a restaurant, your employer can take up to 10% of your gross wages to cover any shortfall in your till. They may, however make deductions over a course of many weeks/months. If you leave employment, they are then allowed to deduct the full outstanding amount from your last pay check.
What can you claim?
Any claim for wages must be for a specific sum of money or a sum capable of quantification. If the payment is uncertain, unquantifiable or a general sum being claimed by way of damages, then they do not fall within unlawful deductions from wages under the Employment Rights Act 1996; such claims must be brought in the civil courts instead.
The following are some examples of what are considered as ‘wages’:
- Any salary, holiday pay, bonus or commission whether contractual or otherwise
- Pay that you are entitled to under statute (e.g. statutory sick pay or statutory maternity, paternity, adoption or shared parental pay)
Workers who believe they have suffered unlawful deductions from wages should take it up with their manager and/or HR/payroll department immediately. If this doesn’t resolve the matter, recourse may be made to formal internal procedures. Only if all else fails should a complaint to an employment tribunal be considered.
However you must remember that there are also exclusions to the definition of ‘wages’, some examples being:
- An advance of wages by an employer, or where a loan is taken from the company
- Expenses incurred in connection with employment
- Payments due under a pension scheme or in connection with retirement
- Compensation for loss of office or in relation to a redundancy.
If your claim falls within one of the above exclusions, you may be able to, instead, make a claim for breach of contract in the employment tribunal or county court. You would need to be able to show that you have a contractual entitlement to this amount, or that the entitlement is implied.
Limit on a claim for an underpayment
The introduction of The Deduction from Wages (Limitation) Regulations 2014 means a two year cap will be placed on all claims that are brought on or after 1st July 2015. This means that the period that the claim can cover will be limited to a maximum of 2 years.
In order to bring a claim in the Employment Tribunal, you must submit a claim within 3 months less one day from the last day that there was an unlawful deduction of payment. Please note that It is now mandatory to go through ACAS’s early conciliation scheme before you can submit a claim to the tribunal.
The starting day of the time limit depends on which kind of deduction there has been. Talk to our experts as a failure to identify the correct starting time may result in you being barred from bringing a claim.
A claim for breach of contract in the civil courts, however, has a time limit of six years from the breach.
Has your employer failed to pay money owed to you? Contact us now to discuss all options available to you in recovering what is rightfully yours. In the first instance, our experts will attempt to recover monies without having to issue court proceedings.
Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.