When can employer make deductions from my salary?

Written By: Justina Ricci

It is unlawful for an employer to make a deduction from a worker’s wages unless the deduction is required or authorised by statute or a provision in the worker’s contract or the worker has given their written consent to the deduction.

What are wages?

Wages means ‘any sum payable to the worker in connection with his employment’. This includes salary, bonus, commission, any other pay due such as sick pay, maternity pay or holiday pay etc.Certain payments are excluded from the definition of payments, such as:

Advances of wages or payments under a loan agreement between worker and employer;
Payment in respect of expenses incurred by the worker in carrying out their employment;
Any payment by way of pension or allowance in connection with the worker’s retirement.

What is a deduction from pay?

Where the payment is due to you, and the employer applies a deduction from what is ‘properly payable’ this constitutes a deduction.

What deductions are allowed?

Your employer will generally be expected to deduct your national insurance contributions, student loans, relevant tax and if they are ordered to do so by court.

Contractual Deductions

A deduction will not be unlawful if it has been “required or authorised to be made by virtue of… a relevant provision of the worker’s contract”. A “relevant provision” means either:

A term that is set out in a written contract that has been given to the worker before the deduction was made.
One or more oral or written express terms, or one or more implied terms, where they employer has notified the employee in writing of the existence and effect of the term (or combined effect of the terms) before the deduction is made.

If your employer reduces your wages without contractual authority or without your individual consent you can:

Accept your employer’s breach of contract and resign and claim constructive dismissal; or
Work under the new terms under protest and bring a deduction from wages claim for the ongoing loss as a series of deductions.

Generally speaking, you are entitled to receive your wages in full at the time they are due, so if payment is late, this counts as a deduction.

It is not necessary for the worker to have signed a written contract, or to have acknowledged in writing that a term had been incorporated. Acceptance of a contract may in some cases be inferred from the worker’s conduct. However, it is necessary for each worker to be notified individually in writing of the term.

The contractual provision must make it clear not just that the sum may be due from the worker, but also that it may be deducted from the worker’s wages. Potter v Hunt Contracts Ltd [1992] IRLR 108). It is therefore not enough to say that the money will be due to the employer. The contract must state that such payment can be deduction from your wages.

The employer must also be able to demonstrate that it can justly the deduction.

Remedies

Your remedy for an unlawful deduction from your wages is via a claim to an employment tribunal. You can seek a declaration, claim payment of the sum unlawfully deducted and in some cases compensation for further financial loss, for example, you may be able to recover bank charges or interest if the deduction caused your account to be overdrawn.

Time Limits

Subject to the rules on ACAS early conciliation, you must bring a claim within three months beginning with the date of payment of the wages from which the deduction was made. Where you complain about a series of deductions, the time limit begins to run with the last deduction in the series.

A tribunal may still consider a complaint presented outside the time limit if it is satisfied that it was not reasonably practicable for you to present the claim before the end of the three-month period and that you presented it within such further period as the tribunal considers reasonable.

There is a two-year ‘back stop’ limiting the amounts that can be recovered in most unlawful deduction claims.

Next Steps

If you believe you have been unfairly dismissed but do not have two years of service, it is important that you discuss your situation with an employment solicitor as soon as possible. Claims for discrimination and automatic unfair dismissal must be brought within 3 months from the date of the act complained of or effective date of termination, so it is advisable that you do not delay and consult with an employment lawyer as soon as possible. We can guide you through the specific processes and provide advice tailored to your situation.