How to make lawful pay deductions

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How to make lawful pay deductions

In order to make a lawful pay deduction from an employee’s wages, one of the three conditions detailed below 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 exemptions from these conditions which allow an employer to recover wages. For example, an earlier overpayment of wages or expenses to a worker.

The law protects individuals from having unauthorised deductions made from their wages, including complete non-payment. This protection applies both to employees and to some self-employed workers.

There are extra protections for individuals in retail work that make it illegal for an employer to deduct more than 10 per cent from the gross amount of any payment of wages (except the final payment on termination of employment) if the deduction is made because of cash shortages or stock deficiencies.

Your employees, if they believe they have suffered an unlawful deduction from wages, should take it up with their manager and/or HR/payroll department. If this doesn’t resolve the matter, recourse may be made to formal internal procedures. Only if all else fails the employee has the right to pursue a formal complaint to an employment tribunal.

If you require any further information please contact a member of the team here at Avensure.


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