Updated for 2016.
Our Crunch advisor’s are only able to answer accountancy related questions. If you have an employment question please either leave a comment below or phone the Acas Helpline on 0300 123 110
Pay and Wages are slightly different
- Pay is the basic amount you should be paid (e.g. your monthly or weekly rate).
- Your Wage can also include any bonuses or commission you are entitled to, holiday payments, statutory payments (sick pay, maternity pay). Wages do not include expenses owed, pension and redundancy payments or compensation for loss of office.
You can read details about incentivising staff with a bonus scheme here.
To calculate your take-home pay, if you have been offered a new job or salary, go to this salary calculator.
To calculate a week’s pay (which you need to do for redundancy payments, holiday pay and pay during notice periods) look at this link.
For details of your pay rights during your notice period go to this link.
Unauthorised Deductions from Pay and Wages
Employees and Workers are protected from employers making unauthorised deductions from their pay or wages.
Your employer cannot deduct money from your pay unless:
- It is required by law (e.g. National Insurance contributions, tax, student loan repayments)
- It is allowed by a term in your employment contract (but you must have seen a written copy of that part of the contract) or if your Employer can demonstrate that you were not ‘ready and willing’ to do the work (for example an employer can make deductions from you pay if you turn up for work late, as long as the right to make deductions from wages for unauthorised absence is is specified in your employment contract)
- It is a statutory payment due to a public authority (you can read more about Direct Earnings Attachments here)
- You have not worked due to taking part in industrial action
- It is to recover an earlier overpayment of wages or expenses (for more information see below)
- It is a result of a Court Order or Employment Tribunal decision.
Before making any deductions, your employer must tell you in writing the full amount you owe and make a demand for this payment and you must give written consent to this deduction, before your employer makes the deduction.
- Unauthorised deductions from for e.g. redundancy payments (i.e. not pay or wages) are not protected, but you may be able to claim for breach of contract if you are entitled to the payment in your employment contract.
- Many employers have training expenses ‘claw-back’ clauses in their contracts – i.e. the contract will say that the Employer can reclaim the cost of training courses they have provided for you, if you leave the employer within a certain period of time of having the training. This may include the cost of the actual training, course materials, course and exam fees, study leave, but should generally only cover formal training that enables an employee to gain a skill that will be useful elsewhere.
- These clauses can be valid, but the amount the Employer asks you to repay must be a genuine pre-estimate of the damages/loss which the employer has (or will) suffered, otherwise it will be known as a ‘penalty’ against the employee which is unenforceable. In determining the amount the employee needs to repay the Employer must consider what benefit they have received from the employee undertaking the training and whether the employee would have any knowledge of the amount of the cost they are being asked to repay. The Employer must also demonstrate that you have agreed to repay such costs from your wages in the future (ideally with a signed agreement before you undertook the training) and ideally take the payment in stages (even after you have left the company).
- However, in a Supreme court case at the end of 2015 (ParkingEye v Beavis), the ‘test’ for what is an unforceable penalty cause was altered by the Court. Although this was not an employment-related case it will be significant. The Supreme Court rejected the test that the amount to be repaid was a ‘genuine pre-estimate of loss’; and said the true test for establishing whether a provision is a ‘penalty’ is whether the provision imposes a detriment on the defaulting party which is out of all proportion to the innocent party’s legitimate interest in enforcing the defaulting party’s obligations under the contract. So, if it is a genuine pre-estimate of loss, and not disproportionate or excessive and not just a deterrent or a punishment to the other party, then the clause may be valid. In assessing when a clause is ‘penal’ it should be considered whether the clause is ‘unconscionable’ or ‘extravagant’ by reference to some norm.
- In a previous case at the end of 2013 (Cleeve Link v Bryla) the claimant had signed an employment contract agreeing that if she was dismissed for misconduct in the first 6 months of her employment, or resigned, the employer could recoup any sums that had been spent on her recruitment and initial training, from her final pay. She was summarily dismissed for misconduct after less than 3 months and the Employment Appeal Tribunal held that the employer could recoup its costs as provided for in the contract.
- The EAT said the clause could only be enforced because it represented compensation for the loss suffered by the employer as a result of the Claimant’s breach of contract (as it had made a serious financial investment in the Claimant before she started work which could be easily quantified). While it is clear this decision was made because the Claimant, by her misconduct, had breached her contract, the decision may not have been the same if she had simply resigned and had not been dismissed.
- In a 2014 case about unused flexi-time, bought under the ‘unauthorised deduction of wages’ legislation, Vision Events (UK) Ltd v Paterson. Paterson was entitled to flexi-time where if he worked more than his contractual 45 hours per week he was entitled to take time off, at a time to suit his employer. The details of how the flexi-time scheme would work on termination of employment (for accrued but untaken flexi-hours) was not documented in his contract or handbook. Four years later he was made redundant and he asked to be paid for the flexi-time he had accrued which was in excess of 1,000 hours. His employer offered to pay part of the hours but Paterson refused and the offer was withdrawn. Paterson made a claim to Employment Tribunal for unfair dismissal and unlawful deductions from wages. The Tribunal rejected his unfair dismissal claim, but agreed there had been an unlawful deduction of wages and ordered Vision Event to pay him over £12,000. The employer appealed and the Employment Appeal Tribunal agreed and overturned the original Tribunal decision. The EAT applied the usual tests of whether to imply a term into an employment contract – whether it was necessary to make the contract work or whether it was a term which both parties would have said was agreed between them. The EAT concluded that it failed both tests – the Tribunal had asked if the term should be implied in order to make the contract fair, but that was not the correct question. The fact that the Employer had made a “goodwill offer’ did not alter the position, they were not legally required to pay the employee. This was not a majority decision by the EAT, the claimant was close to winning his case as a minority accepted his position that it was obvious that he did not agree to work for no pay. For more details about implied terms – see our Guide here.
- A 2014 Employment Appeal Tribunal case found that docking an employee’s pay for their failure to give her full contractual notice period on resigning was enforceable. The employee was liable to pay the employer a sum equivalent to the wages she would have earned during the unworked part of her notice period (which was in fact the whole month as she had not given any notice). The Courts considered the amount was a “genuine pre-estimate” of the loss the employer is likely to suffer as the employee was highly skilled and would be expensive to replace.
- Employers must also consider that, generally, taking genuine deductions from pay cannot leave the worker earning below the national minimum wage for that period (the deduction is made), where leaving employment is not a matter of misconduct on the employee’s part, or the employee is not responsible for the termation (e.g. a redundancy; but this would not apply where the employee voluntarily resigns). In Commissioners for HM Revenue and Customs v Lorne Stewart Plc 2014, Miss Brade worked for Lorne Stewart plc and signed an agreement whereby she agreed to reapy all or part of the costs of a training course if she left employment within 2 years of attending the course. Brade resigned and Lorne Stewart made a deduction from her final salary payemtn (as the agreement authorised). The Employment Appeal Tribunal found that a voluntary resignation would allow the Employer to be entitled to deduct the money due without infringing the National Minimum wage legilsation.
- In 2014 the Employment Appeal Tribunals found that underpaying holiday payments could be an unauthorised deduction from pay – you can see all the details here.
If your employer deducts money from you without following the law
After checking your payslip and contract for an explanation, try to speak to your employer first to find out why, or a Trade Union representative if you are a member. Ultimately you have the right to make a claim at Employment Tribunal for your money.
If your employer tells you that you have been overpaid
Your Employer will no doubt try to recover the overpayment from you, and they are allowed to deduct payments from your wages, by law, to cover this. However, if you can prove that:
- You were led to believe by the Employer that you were entitled to the extra cash
- And you had, in good faith, ‘changed your position’ as a result of the overpayment (spent it) and
- The overpayment was not your fault
You may be able to keep some or all of the money. If you have incurred expenditure (e.g. with a mortgage) because of the overpayment then your Employer may not be able to recover all of it. However, to prove that you had ‘good faith’ may be difficult as you would normally notice if you wage increases greatly and you haven’t been informed of this. Your Employer should be reasonable in requesting how and when the overpayment be paid back to them.
Deductions from SSP
Employers are legally entitled to make deductions from SSP (as it is seen as a ‘wage) for salary overpayments, for example, but are not advised to do this as this could breach the implied duty of trust and confidence which exists between the employer and employee, if an employee is receiving little or no money while sick. Employers should wait to make the deductions (which the employee must agree to) until the employee returns to full pay or, if they leave employment (or their employment is terminated), from their final salary payment.
Deductions from Retail workers (shop workers and restaurant staff)
There are special rules for deductions made from shop-worker’s pay.
The employer of a shop-worker can make deductions for cash/till shortages or missing stock. This could be, for example, because the shop-worker has been dishonest or because of theft by a customer.
The employer must give details in writing of the deduction to the employee on pay day. Any deduction for missing cash or stock must be made within 12 months of the employer discovering the shortage.
The deduction must be no more than 10% of the shop-worker’s gross pay on any one payday. This deduction can be made in addition to other lawful deductions which the employer is allowed to make.
There is no limit to the amount of money that an employer can deduct in total from a shop-worker for missing cash or stock. The only limit is how much can be deducted on each pay day.
Is your Employer obliged to pay you if you cannot get into work because of severe weather conditions or public transport disruptions?
The responsibility is on you, the employee, to get to work regardless of the circumstances (unless your Employer has contractually promised to provide transport for employees to and from work).
If you fail to attend work there is no obligation on the Employer to pay you (or pay you for missed time if you arrive late) – even if is not your fault – unless your employment contract has specific provision for such absences to be paid. Your Employer is only obliged to pay you when you are ready, willing and available to work.
An Employers failure to pay you in these circumstances is not an unlawful deduction of wages.
In these circumstances employers should consider:
- Encouraging employees to find other forms of safe transport
- Allowing employees to work from home
- Allowing employees to make up the time at a later date
If none of these options are viable then the Employer should advise the employees whether their time off work in these circumstances will be paid or unpaid or whether they can request to take the time off as paid annual leave. (However, employers cannot insist that employees take annual leave without the requisite notice – see the information on notice periods here in the Working Time Directive section).
If my employers business premises is temporarily closed (e.g. due to flooding, fire, power supply failure) are they obliged to pay me?
If an Employer has to temporarily close their business premises at short notice and there is no work available for its employees as a result this is called a period of lay-off. During a lay-off you are entitled to receive normal pay (unless there is a contractual right to be laid off without pay or employees consent to not being paid).
If your contract of employment has a right for the Employer to impose a period of lay-off without pay, or you consent to a period of lay-off without pay, you should be entitled to a Statutory Guarantee Payment for any complete day of lay-off (for more information about layoffs see the Direct Gov site here or our new Guide to Short-time working and layoffs here.
If you are entitled to normal pay but do not receive it you can sue your Employer for damages or claim unfair constructive dismissal (if you resign as a result of the non-payment) on the grounds of a breach of your contract of employment; you may also claim that your Employer has made an authorised deduction from wages.
If your Employer is considering cost-cutting measures that includes pay cuts, then a pay cut should not be imposed upon an employee without their consent. They should seek your agreement and confirm the change in writing, informing you if this is a permanent change (or if there is a time limit).
If you do not accept the proposed change you should:
- Make it clear, in writing, that you are working under protest or as a last resort
- Resign on the grounds that your employer has breached your contract of employment by imposing a unilateral change (always take advice before pursuing this course of action).
- In either case you should raise a grievance detailing your complaint. You will then be in a position to bring a claim for unlawful deduction of wages, breach of contract and/or, if you have resigned, constructive dismissal.
Your Employer, if you do not accept the change, may terminate your existing contract and re-engage you on a new contract. This is a dismissal so you could make a claim for unfair dismissal at an Employment Tribunal (although your employer will probably claim this was a fair dismissal for business reasons).
As this can be a very complicated area, please take advice from your Trade Union, or the Citizens Advice Bureau or elsewhere before proceeding down this route.
Our Crunch advisors are only able to answer accountancy related questions. If you have an employment question please either leave a comment below or phone the Acas Helpline on 0300 123 110.
If you are an Employer and need ongoing professional help with any staff/freelance issues then talk to Lesley at The HR Kiosk – a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.
Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.
Image by Becky Stern