Employment law prohibits deductions from wages unless the worker specifically authorises it in advance and in writing using section 13 of the Employment Rights Act 1996. This is so even if the money is owed to the employer by the worker. Furthermore, despite the fact that an employer may have no work available, they are still obligated to continue to pay employees who are willing to work.
Wages and bonuses
Employees should receive pay if they are sick or away on parental leave. This pay, though, may be less than normal depending on the contract. Employment law ensures that, generally, employees are entitled to the legal minimum statutory sick pay.
Employment law states that bonuses that are not part of the contract are regarded as wages when they are paid. The best employment lawyers would advise that discretionary bonuses are complicated and depends on the bonus scheme. Nonetheless, these bonuses are treated as wages once the employer has awarded them. The employer is vulnerable to an employment tribunal claim if they seek impose a condition after the award is made and then seeks to claw the money back. To challenge the employer, the employee would need to show that the bonus is discrete, identifiable and perhaps based on a formula.
A wage or salary does not include an advance of wages, money borrowed from the company, company expenses and payments made for a pension scheme or retirement. Disputes regarding these types of payments come under breach of contract. Most of these claims can also be brought at an employment tribunal.
For employees working in a restaurant, tips from customers do not count as wages subject to the National Minimum Wage. But the same tips are part of wages when it comes to unlawful deductions. So, unless it is part of the employment contract or agreed in writing, the restaurant owner cannot make deductions from tips.
Legal wage deductions
There are a number of circumstances where an employer can make deductions from an employee’s pay. Employment law gives employers the right to claim back money that was overpaid. Employers should contact the employee when they are aware of the mistake. If the overpayment was a long time ago then the employer needs to be flexible, fair and agree a repayment plan. If the employee disagrees with the deduction and discussion with the employer has not resolved this, then a claim can be made at the employment tribunal by the employee.
Deductions for tax and national insurance are legal requirements. Furthermore, a clause in the employment contract can allow for deductions that cover union dues or payments to a pension scheme. Other deductions will have to be agreed in writing before they are carried out. These could include, industrial action or a court order.
Special rules apply to shop workers involved in cash shortages or missing stock. If an employer decides a deduction should be made, he or she must write to the employee giving details of the deduction. The deduction should be made within 12 months of the discovery of the shortage. The employer can only take a maximum of 10% of the weekly or monthly gross pay.