Unlawful Deduction of Wages: 8 Essential considerations if you are thinking of making a claim
Last updated: 13th May 2021
There are several things to consider before embarking on your claim. The most obvious being what deductions are deemed as ‘unlawful’. The following sets out 8 essentials you need to consider before making a claim.
Armed with this information you will be able to make an informed judgement on the viability of your case. You will clearly understand what the law defines as wages, understand when your employer can legally make deductions, what you should expect to be awarded if successful, and the time limits that apply to advancing your claim.
1. When are deductions from wages considered unlawful?
Your employer can only make deductions from your wages for one of two reasons. And they are:
- If you as the employee have given your permission for the deduction to be made
- Or, if the deduction must be made by your employer by law. For example, a deduction of National Insurance or tax as mandated by statute
Deductions from wages are considered unlawful unless they sit within these two legal parameters.
You can find more information on the legislation that governs claims of unlawful deduction of wages under Sections 13-27 of the Employment Rights Act 1996.
2. What is the legal definition of wages?
The law defines ‘wages’ as:
‘any sums payable to the worker in connection with his employment’
As an employee or worker your wages will cover a range of payments you are entitled to receive. Whilst the most obvious being your wages or salary, this will also cover commission (including post-employment commission) and bonuses.
This similarly applies to other statutory payments to which you are entitled. For example, statutory sick pay, statutory holiday pay and statutory maternity pay.
You should also expect to receive your normal wages in circumstances where you have the right to paid time off work. For example, it would be unlawful for your employer to deduct your pay for time taken off to attend an antenatal appointment.
Regardless of your length of service, if you believe you have experienced any form of Pregnancy Discrimination in the workplace, you should seek legal advice.
So, my bonus is classed as wages?
Unfortunately, not in all cases. This largely depends on whether it falls within the category of a contractual or discretionary bonus.
Where your employer fails to pay you a contractual bonus, you will have grounds to make a claim. However, it is more complicated when it comes to discretionary bonuses as it will depend on the specific terms associated to it.
It would be advisable to seek legal advice before taking any firm action relating to non payment of all, or part of, a discretionary bonus and to check the terms of your employment contract.
ESSENTIAL FOR YOU TO KNOW
Unlawful deduction of wages claims may only be advanced at Employment Tribunal to recover QUANTIFIABLE SUMS
So, if the terms of your bonus payment are not clear cut, or payment is at the ‘absolute discretion’ of your employer you are unlikely to be able to recover them via an unlawful deduction of wages claim.
In such circumstances you would need to look at other options to recover the money:
- If your employment has ended, you would need to advance a breach of contract claim at Employment Tribunal (Please note: Such claims are subject to the tribunal limit of £25,000)
- Where your employment is ongoing, you will need to seek redress via the County Court
I work in hospitality and get tips as part of my wages. Are they covered?
If you are an employee or worker in the service sector, you are likely to be paid a proportion of your wage via gratuities, tips or service charges through a tronc.
You are entitled to bring a claim for unlawful deduction of wages against your employer, if they have kept such payments from you.
ESSENTIAL FOR YOU TO KNOW
Any gratuity, tip or share of tronc you receive as part of your wages cannot be used by your employer to meet their National Minimum Wage obligations
Under the legal definition of wages, what is not covered?
You need to be aware that under the law, the following payments are not classed as wages so cannot form the basis of any claim you may be considering:
- Redundancy Payments
- Payments relating to share schemes
- Payment in lieu of notice (PILON)
Expenses are not classed as wages as they are not paid in connection with your employment. If your employer is refusing to settle outstanding expenses with you, you will have to consider either recourse to the County Court (if still employed by them) or by way of a breach of contract claim at tribunal (if no longer employed by them).
Although redundancy payments are not classed as wages, where an employer has failed to pay a redundancy payment, the effected employee can make a claim under section 164 of the Employment Rights Act 1996.
Payments Relating to Share Schemes
As opposed to being an unlawful deduction of wages claim, where you are owed money relating to a share scheme, you would need to advance a breach of contract claim.
Payment in Lieu of Notice (PILON)
PILON payments do not fall into the definition of wages as they are not contractually due in respect of ‘the provision of service’ during employment. Any claim you may have for unpaid PILON should be brought as a breach of contract or wrongful dismissal claim.
Conversely, if your wages have been docked during a period of garden leave, you will be eligible to seek recompense via an unlawful deduction of wages claim.
What about if I’ve been paid late?
The legislation defines wages as payments that are properly payable ‘to the worker on that occasion’ (Section 13(3) of the Employment Rights Act 1996). So, as soon as your wages are late you are entitled to bring a claim.
You should be aware however, that such legal action could be a waste of your time.
In the majority of cases, by the time such a claim is heard by the Employment Tribunal, most employers would have usually paid up. Where this is the case the tribunal cannot order the payment of sums already received by the claimant.
If you have more than 2 years’ service and your employer is a persistent late payer of your wages, you may want to consider resigning and pursuing a constructive dismissal claim.
4. Do I need 2 years service to be able to make an unlawful deduction of wages claim?
Where your employer has made unlawful deductions there is no minimum duration of service required before you are eligible to make a claim.
In contrast to breach of contract disputes, you can also bring your claim whilst still employed, with no need to resign to resolve the matter.
5. What time limits apply to making a claim?
Very strict time limits will apply to advancing your claim for unlawful deduction of wages. You must commence your claim within:
- 3 months of the deduction date in question
- 3 months of the last in a series of unlawful deductions
You should also be aware that where previously you could claim for wages going back 6 years, since 2015 you are now limited to only 2 years.
AN EXAMPLE OF TIME LIMITS RELATING TO AN UNLAWFUL DEDUCTION OF WAGES CLAIM
Mrs Smith works as assistant to the Managing Director of a marketing firm.
The nature of her work means that for the last 12 months she has frequently had to stay late to complete work needed for the following day. Mrs Smith’s contract states she is entitled to paid overtime once she has worked more than 40 hours a week.
She has never been paid any overtime and her employer is refusing to pay the additional pay she is entitled to.
Mrs Smith has already submitted a formal grievance but is still not being paid correctly. She is entitled to advance a claim for unlawful deduction of wages at Employment Tribunal.
So long as she commences her claim within 3 months of the last incidence of non payment of her overtime, she can make a claim for all outstanding overtime pay due to her from the last 12 months.
6. If I’m absent from work is my ability to claim effected?
This largely depends on what type of employee/worker you are.
For example, if you are either a piece worker where you are paid on the basis of your output, or are paid on an hourly rate basis then your ability could be effected. There will be an overriding presumption that you are obligated to provide a ‘consideration’ (or work) to your employer in order for you to be owed wages.
If you are a salaried employee however, your entitlement to be paid (and therefore make a claim if not paid) when absent will rest on whether your absence was forced on you, or you are voluntarily absent.
Absence due to illness
As a salaried employee it is presumed that if you are absent from work due to illness, you should be paid your normal salary.
It is a normal expectation that this is covered within your employment contract. Employers will generally specify sick pay limits . For example, it would not be unusual for your employer to stipulate that they will only pay full pay or statutory sick pay for 12 weeks and then following this half pay for 12 weeks and SSP after that.
7. What is not protected under the legislation governing unlawful deduction of wages?
There are 3 areas where you are not afforded protection under the legislation.
The overpayment of wages or expenses
Where your employer believes they have made an overpayment of your wages or expenses and they subsequently deduct such sums from your salary, you cannot bring a claim for unlawful deduction of wages. The Employment Tribunal would have no jurisdiction to hear such a claim.
Payments made to a public authority
Similarly, the tribunal would have no jurisdiction to consider a claim where money has been deducted from your salary to meet obligations to a public authority. For example:
- The payment of National Insurance or Tax
- Deductions relating to Child Support payments
Attachment to earnings orders
The Employment Tribunal cannot consider any unlawful deduction of wages claim where your employer has made deductions in line with an ‘attachment to earnings order’. For example where a County Court Judgement against you is awarded to a third party and your employer is instructed to pay them directly.
8. What to expect if successful at Employment Tribunal
When the tribunal finds in favour of your claim, it will make a declaration to that effect.
As a successful claimant you can then expect for an order to be made to your employer to repay the amount they were found to have unlawfully deducted.
There is no minimum amount or upper limit to what your employer can be ordered to pay. The upper limit of £25,000 applied to breach of contract claims does not apply in these cases. Substantial unpaid commissions or bonuses can therefore be pursued via the Employment Tribunal.
Whilst the amount of your award will be expressed in gross figures, your unlawful deduction of wages claim will be repaid net of Tax and National Insurance.
What to do next if you have a claim
The Do I Have A Case team have helped employees across the UK advance their claims for unlawful deduction of wages at Employment Tribunal and achieve success.
If you prefer, you can always submit your details via our 24/7 online enquiry form. Once we have your information we will get back to you via phone, email or text no more than 48 hours later.
If your unlawful deduction of wages claim exceeds £3,000 we could help you with your case on a no win no fee basis.
Some frequently asked questions about unlawful deduction of wages
My employer has been taking money from my wages. When I questioned it, they said the deductions related to an attachment to earnings order. I want to pursue an unlawful deduction of wages claim. Do I have a case?
In short, I’m afraid not. This is one of the circumstances where you do not have protection under unlawful deduction of wages legislation and the Employment Tribunal would not hear such a case.
I work in a shop and my boss has been taking money from my pay. They say it’s to cover a shortfall in the till. Is this even legal?
In this case you would need to check you employment contract, as you may have agreed to this when you signed it. You need to look for a ‘permitted deductions’ clause. This can often be in place to cover stock or till shortages. But, you need to be aware that even if you did sign, your employer cannot deduct more than 10% of your gross pay.
I’ve been forced to take a pay cut without any consultation. My line manager said the company has the right to do this within our contracts. Apparently it’s called a unilateral deduction. Surely this isn’t right and I can claim for unauthorised deductions of wages?
Unfortunately, if your contract does contain a clause allowing your employer to do this you can’t pursue a claim. Check your contract carefully and if your colleagues have been effected. If there is no clause and they have made these deductions unilaterally, and without your consent, you would eligible to advance a claim.
I’m a server in a restaurant and my employer has stopped giving me my share of the tips, is this legal?
Not necessarily. As long as you did not consent to tips being deducted from your wages when you signed your employment contract, your tips are considered wages under the law. As such you may be able to bring a claim for unlawful deductions of wages at Employment Tribunal.