Deductions from Wages

What are the components of wages?

Wages are what your employer pays you for doing your job. Wages include all the compensation connected with your job such as bonuses, fees, commissions, overtime pay, holiday differentials, etc. Other payments such as sick pay or maternity pay likewise form part of this. Also included are items with fixed values which can be used as payment for goods and services or exchanged for cash. These can be items such as cash vouchers, gift certificates, etc.

Some items do not form part of your wages. These include tips received in the course of your work, loans and salary advances, pensions and lump sum payments for retirement are not part of wages either. The reimbursement or payment for expenses incurred in the course of performing your job is also excluded (eg, the travel expenses).

Disclosure of deductions

Workers are afforded a substantial amount of protection from unauthorised wage deductions through several rules and regulations. All deductions must be disclosed by the employer beforehand. The reasons for the deductions must be clearly stated and within the parameters and guidelines issued by the government.

Government rules regarding deductions

Under the law, the deductions are only permitted if they are:

  • allowed by law – eg, income tax, National Insurance or government loan payments;
  • explicitly consented to in writing by the employee, subject to certain conditions;
  • explicitly mentioned in the employee’s contract of employment and agreed to by the employee;
  • statutory payments to be made to a public authority;
  • incurred as a result of absence from work because of employee participation in strikes and other industrial actions;
  • for the purpose of recovering excess payments of wages or expenses;
  • ordered by a court or through an employment tribunal decision.

Even with your explicit permission, deductions must not result your pay levels falling below the standard national minimum wage unless it is for:

  • tax or National Insurance;
  • something you’ve done and your contract says you’re liable for it, eg, a shortfall in your till if you work in a shop;
  • repayment of a loan or advance of wages;
  • repayment of an accidental overpayment of wages;
  • buying shares or share options in the business;
  • accommodation provided by your employer;
  • your own use, eg, union subscriptions or pension contributions.

Retail work: extra protection from deductions

Retail workers are given extra protection from deductions to their wages due to the nature of their work. This is that the imposition of deductions which were agreed upon to deduct inventory shortages and losses, cannot exceed 10% of the employee’s gross wages for that specific wage cycle.

Should the losses be more than 10%, it can be deducted on the succeeding wage cycles but can never exceed 10% in any cycle.

However, if the employee with an outstanding obligation is about to leave the company, the employer can deduct the full amount from the last pay check.

Procedure to follow in the event of deductions

If you notice you have not been paid your full wages during a certain period, you should:

  • Look at the pay slip as well as your employment contract to see if the deductions are lawful and within the parameters mentioned above.
  • Take it up with your employer to see if they have a reasonable explanation. The aim here is to be able to solve the problem without resorting to legal measures.
  • Consult your local union, employees’ association or Acas to see if they can intercede or work out a solution your behalf.
  • If, after exhausting all those means and no solution has been reached, you can go to an employment tribunal to recover your money plus the charges you may have incurred due to non-receipt of your wages.
About the Author

Nicola Laver LLB

Nicola is a dual qualified journalist and non-practising solicitor. She is a legal journalist, editor and author with more than 20 years' experience writing about the law.

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