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Legal developments of practical interest

Has your Employer withheld your wages? Do you have any other issues with your wages?

Sometimes problems can arise with payment of your wages. Your employer is not allowed to withhold your wages or make deductions, save in limited circumstances. The information below is a general overview of the law in this area and should provide you with an idea as to whether your employer has deducted or withheld your wages unlawfully.

Unauthorised deduction of wages

The Employment Rights Act 1996 defines wages as any sums payable to a worker by his employer in connection with this employment. This will include things like bonus's, commission or holiday entitlements. You are entitled to payment of your wages in full. There are several items which are not included in the definition of wages. Examples would be: expenses, car mileage, pensions, allowances or gratuities in connection with retirement, redundancy payment and benefits in kind.

Can my employer make any deductions?

Statute does provide that your employer may make certain deductions from your wages in some circumstances. The circumstances in which these deductions can be made are as follows:

1. When your employer is authorised by statute.

This is for example when your employer is obliged to make deductions for income tax and National Insurance payments. Other examples of this would be if you have a County Court judgement against your name and the Court have ordered that you must pay directly from your earnings and there is an Attachment of Earnings Order. Also, in family proceedings there may be an Order for Maintenance Payments to be deducted from your wages at source by your employer. If you are having to pay any Court fines, your may be obliged to take deductions at source for payment of these fines.

2. You may have provisions in your contract which authorise your employer to make certain deductions from your contract.

There may be a written o rimplied term in your contract. Implied terms are discussed more on our termination page under Wrongful Dismissal. An implied term can exist if, for example, there was a common practice in relation to deduction of earnings but it is not expressly stated in your contract. If your employer wishes to rely on an implied term they must notify you in writing of the existence of the implied term and also explain to you the effect that the term will have in relation to deductions from your wages.

3. Previous agreement in writing.

It may be the case that you have previously agreed in writing with your employer that certain deductions may be made. If, for example, your employer has written to you and asked you to confirm your agreement to deductions and you have signed and responded to them consenting to their taking those deductions, they will be entitled to do so. The employer can only make deductions on this basis where your consent is in writing prior to the actual deduction being made. They cannot ask you to sign a letter consenting to it after they have made the deduction.

There are some further examples as to when employers can deduct money lawfully from your wages and these are as follows:

  1. If they have overpaid your wages or any expenses, they are entitled to recoup those sums from you.
  2. If the money is required by statutory authority, for example, you have underpaid tax to the Inland Revenue, your employer may deduct the relevant payment in this regard.
  3. The deductions may be made in respect of strike action or industrial action if appropriate.
  4. If the deduction has been made in satisfaction of a contractual obligation to pay any third parties.
  5. If a Court or a Tribunal has ordered that you must pay your employer money they may take deductions from your wages in respect of that.
  6. If there has been a mistake in computing the amount of wages to which you are entitled and there is effectively a deduction as not enough is paid to you, your employer has not breached the law. There is a difference between an employer taking a decision not to pay the relevant amount wages because they do not believe they are entitled to receive such under the current contract and a straightforward error in working out how much you are actually entitled to.

Can my employer demand that I pay money back to them from my wages?

The above examples actually relate to the employer directly deducting sums from your wages before paying the balance out to you as your monthly salary. However the law does work in both ways and save for the circumstances set out above, the employer must not demand any sums of money from you. This prevents your employer from recovering sums of money from you on demand as opposed to actually deducting them from your salary.

What can I do if my employer has deducted or withheld my wages?

In terms of actually recovering sums from your employer in respect of unlawful deductions you can apply to the Employment Tribunal and ask them to make a declaration that your employer has taken unauthorised deductions from your wages. The Tribunal can also order that the employer must repay the sums deducted.

When do I need to make a claim?

You should read the Courts and Tribunals page and be careful to ensure that you meet the limitation date for issuing an Employment Tribunal of three months from the date that the deduction occurred. Or, if your claim is in respect of a payment that you have been forced to make to your employer which you think is unlawful the claim should be made within 3 months of that payment.

If your employer has been deducting money over a period of time then the three-month limitation period will run from the date of the last deduction that your employer made. You should however read the Courts and Tribunals page which would give you further information about limitation periods. Action may also be taken in the Court in respect of unlawful deductions from wages as a claim for the deductions or alternatively as a claim for breach of contract. This is a technical legal decision and is normally best taken with the assistance of a solicitor.

National Minimum Wage

The National Minimum Wage Act 1998 introduced the National Minimum Wage which came into force under the National Minimum Wage Regulations 1999 on the 1st of April 1999. The Act introduced a National Minimum Wage hourly rate for workers between the age of 18 and 21 and over the age of 22. The current national minimum wage is £3.70 which will rise to £4.10 from October 2001 and up to £4.20 per hour in October 2002. The National Minimum Wage for 18 - 21 year olds is £3.60 per hour.

Holiday entitlement and pay

Since the introduction of the Working Time Regulations 1998 workers are entitled to at least 4 weeks holiday each year. Since 25/10/01 entitlement to paid leave now starts from the 1st day of employment. This holiday cannot be substituted by payment in lieu except when your employment has been terminated.

When your employment has been terminated you are legally entitled to receive payment for any holidays that you have outstanding to which you are entitled under the Working Time Regulations 1998 being your 20 days.

If your contract specifies that you are entitled to more than 20 days holiday you will not necessarily be entitled to payment in lieu of those holidays on termination of your employment. This will depend on whether you have an express right to receive payment in this regard set out in your contract. Sometimes it can be considered as a term implied by custom or practice to pay holiday in lieu of notice and this will depend on your employer. If you have any doubt you should take full legal advice.

Sick Pay

You are entitled to receive statutory sick pay for the first 28 weeks of any absence from work on account of sickness in a total period of three years. Statutory sick pay is paid to you by your employer on behalf of the government and is currently set at £60.20 per week. SSP is payable after a qualifying period of 3 days after which your employer should begin to pay you SSP.

After 28 weeks of illness you will normally have to claim incapacity benefit from the Department for Social Security. In order to claim statutory sick pay you must be an employee with a contract of service and you must be aged between 16 and 65. You must also earn more than the lower earning limit that is set by the government. At present this limit is £67 per week.

In practice most employers provide contractual sick pay and your entitlement should be set out in your contract of employment. If is not expressly stated in your contract sometimes you can rely on an implied term into your contract which will be implied by examining the custom and practice of your employer and how they usually treat personnel who are off sick.

Generally, contractual sick pay provisions will entitle you to full pay whilst you are off sick for a set period of time but your employer should provide you with a written statement of any terms and conditions relating to your entitlement to sickness pay, contractual or SSP, in order that you are clear as to what this entitlement is.

The Equal Pay Act

The Equal Pay Act is specific legislation to ensure that men and women in the same employment are paid the same wages. You should also check the section of our website on discrimination as this can also be relevant in these situations.

The Equal Pay Act is designed to ensure that there is a specific remedy that will oblige an employer to pay equally.

In order to rely on this Act an employee must find an actual man or women with whom they can compare themselves and that person must be employed by the same employer as you. You can rely on a comparable person who is employed by an associated company of your employer, this is where your employer may own another company or where two companies are both controlled by the same third person.

If you can show that you are being paid less than a worker of the opposite sex carrying out the same job as you, you may be able to bring a claim in the Employment Tribunal to recover lost earnings and ensure that your future earnings are brought into line with your co-worker.

Click here to go to the Employees page.