The Employment Act 2006 (“Act”) protects workers from having unauthorised deductions made to their wages. Section 21 of the Act provides that, in general terms, an employer must not make any deduction from wages of a worker they employ except under prescribed conditions (see further below).
Deductions made in contravention of section 21 of the Act are commonly known as “unlawful deductions”. Tribunal claims for unlawful deductions from wages typically involve non-payment of wages, holiday pay and notice pay.
The protection against unlawful deductions from wages applies to all workers, not just employees. For the purposes of an unlawful deduction from wages claim, wages are defined as “any sums payable to the worker in connection with their employment“, subject to specific inclusions and exclusions which are considered below.
The term “wages” expressly includes any fee, bonus, commission, holiday pay or other emolument referable to the worker’s employment, whether payable under the contract of employment or otherwise.
An unlawful deduction occurs where the total wages paid on any occasion by an employer to a worker are less than the net amount of the wages “properly payable” on that occasion.
When can deductions lawfully be made from a worker’s pay?
Deductions may lawfully be made from wages in respect of a worker if:
- the deduction is required or authorised by statute, for example, it is in respect of National Insurance contributions or income tax;
- it is authorised by a relevant clause in the worker’s contract; or
- the worker has given their prior written consent to the deduction.
This does not, however, apply to a deduction made as a result of an overpayment of wages or expenses.
Note that it is unlawful to make any deduction from pay or for an employer to receive payment from a worker in connection with a work permit fee or any fee charged by an employment agency with respect to the employment of that worker and any agreement to this effect will be void.
Unlawful deduction claims
The worker should, in the first instance, contact the employer and ask why the deduction has been made and under what statutory provision or authority. Where there has been a deduction which does not comply with section 21 of the Act, the employer should agree with the worker the timeframe within which the outstanding monies will be paid.
If the matter remains unresolved, then the worker can make a complaint to the Employment and Equality Tribunal (the “Tribunal”). The complaint must be made within 3 months from the date the deduction was made, although the Tribunal has the ability to extend the timeframe where it considers it reasonable to do so.
In the case of a series of deductions, the three months run from the date of the last deduction in the series.
Example:
If wages were due to be paid on 25 January, the 3-month time limit would end on 24 April.
Remedies
If the Tribunal finds that the employer has made an unauthorised deduction from wages, it will make a declaration and can order the employer to:
- repay the unauthorised deduction or payment to the worker; and
- pay an additional amount of up to four weeks’ pay if it considers it to be “just and equitable in all the circumstances”.
The relevant figure for the purposes of calculating a week’s pay is currently capped at £540.
