Thursday, 29 June 2023 12:54

Deductions from Pay

Statistics released last week from the Ministry of Justice show that 23,000 claims were received by the Employment Tribunal Service between January and March this year (2023). This is an increase over claims for the same period last year of 5% for single claims and 39% for multiple claims; where a claim is bought by two or more claimants against the same employer or grouped together owing to similarities.

The type of claim with the highest number in this period was for unauthorised deduction of wages, for which there were 7,400 claims. Some of these may have arisen on account of the high number of strikes we saw by workers during the first quarter of the year, although deducting pay for strike action is allowed. Such a high figure does suggest that there may be other reasons that pay has been withheld where the employee has felt wrongfully so.

Should an employer be challenged by an employee regarding deductions then effort should be made to resolve the matter through discussion and agreement. If this doesn’t conclude the matter then the employee may escalate the matter by speaking to their trade union representative if they have one, by contacting ACAS for support, and ultimately by taking their employer to Employment Tribunal.

Pay is the clearly the main reason that people come to work and so it is understandable that situations and emotions can become heated quite quickly if someone feels they have not been paid accordingly or have had earnings withheld unfairly. Even when a deduction is justified, there are certain rules that an employer must adhere to.

Employers may not make deductions unless:

  • It’s required or allowed by law. Income Tax, National Insurance and student loan repayments are obvious examples
  • The employee has not worked due to taking part in a strike or industrial action
  • The employment contract permits it or it is agreed in writing. This may be for pension contributions, Trade Union subscriptions or salary sacrifice scheme
  • An earlier overpayment of wages or expenses is being reclaimed
  • Fulfilment of a court order or tribunal decision

Even when deductions are permissible, some are restricted to 10% of the employee’s gross in any pay period and there are some rules that come into effect should the deduction reduce the employee’s pay below the National Minimum Wage.

Some of the more common situations that we are asked to advise clients on where a deduction of pay may occur include:

Unauthorised absence: If an employee doesn’t turn into work then you wouldn’t expect to pay them. Depending on the situation, the absence could be commuted to holiday, but unauthorised may still lead to disciplinary action, especially if it is persistent.

Authorised Unpaid Leave: There is a raft of situations where this may be an appropriate solution to an employee needing to be absent from work. We would expect this to be covered by a formal, written agreement.

Holiday pay: This usually occurs when an employee leaves. Accrued holiday that has not been taken should be paid, but any that has been taken but not accrued can be deducted from the employee’s final pay.

Holiday pay for overtime/bonuses/commission: Strictly speaking, regular additional payments should be factored into an employee’s pay whilst they are taking holiday leave. They may have a justified claim if it isn’t.

Training costs: It is permissible to deduct costs for some training if it is stated in the contract of employment or if there is a separate training cost agreement. Cost for training that is for compliance or a statutory requirement for the employee to do their job, such as health and safety training cannot be deducted. Skills training can be deducted but even then, it is usually on a reducing scale over time and we always advise a specific agreement to cover this.

Time off for medical appointments: Strictly speaking this would usually be authorised absence or the employee could take it as holiday. If it was only for a short period such as a dental check-up then the employee might be able to fit this into a lunch break. For the sake of good employee relations, we recommend that the employer allows minor medical appointments without making deductions. Staff are legally allowed time off for medical emergencies involving a dependant. You may want to assess each case individually. Absence for Maternity and pregnancy related appointments should never be deducted.

Time off for the school play/sports day: In the interest of employee relations, we would again recommend not making deductions for short term absence of just a few hours, especially when it involves workers children.
Missing cash or stock: Certain rules apply solely to retail. If responsibility for cash in a till or for retail stock is the contractual responsibility of an employee, then deductions may be lawful if they go missing. The 10% rule might apply here.

Damages to stock/equipment/vehicles: For premises and equipment, we would expect most employers to have adequate insurance in place to cover damages caused by employees. It would be very irregular to be re-imbursed by your insurance company and then make an additional claim against the employee. For vehicle damage, insurance excess may be charged to an employee and therefore deducted form there pay but this should be a contractual clause.

As usual, you should employ consistency in your decisions when it comes to making deductions from staff pay. Some cases will be subjective and open to debate, in which case your decision making processes must be consistent.

If you require clarification or re-assurance that any deduction you are making are fair, legal and accurately calculated, call us on 01452 331331 or e-mail This email address is being protected from spambots. You need JavaScript enabled to view it.


Read 990 times Last modified on Friday, 30 June 2023 07:10


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