From time to time, you may have an issue paying wages. If this is the case, what are the rights of your staff? It’s worth knowing, just in case you have a problem. But what about withholding pay—what’s your legal standing?

Can an employer withhold pay?

First of all, can an employer withhold wages? Yes, in some circumstances. But is an employer withholding wages illegal? Yes. But, again, in some circumstances. But for both instances, it has to be the right situation.

The Employment Rights Act of 1996 confirms that employees receive full payment of their wages. This includes holiday days, commission, and any pre-agreed bonuses. But statutory authorisation is an example where you can deduct/withhold wages lawfully. This is where you make reductions for National Insurance payments and income tax.

Additionally, a county court might have asked you to deduct an employee’s wages due to an outstanding fine. This is an “attachment of earnings order”.

There’s also the chance you could overpay your staff. If this is the case, you can agree with your employee on how you will deduct the amount from their future payslips.

Another possibility is an underpayment to the HMRC in tax. When this happens, you’re within your legal rights to recoup the money from your employee. You are within your rights to take it back without your employee’s consent.

And a final consideration is a court or tribunal. From this, there may be a request for a repayment. This would be from an employee back to you. At this point, you can arrange for deductions from your staff member’s wage.

What if I withheld pay by mistake?

You’ve not broken the law if this happens. Mistakes can happen due to a computer system or software issue. Be sure to notify your staff of the issue and inform them that you’ll address the situation as soon as possible.

Can an employer withhold pay after termination?

If an employee’s role is terminated, and he or she owes you money, you no longer have a contractual right to remove any money from the employee’s wage. Withholding pay could lead to an unlawful deduction claim from your employee. Although, as an example, you can withhold for the final pay even if the person’s last day was 3 weeks ago.

Can an employer withhold pay if staff quit without notice?

They’ll have been in breach of your contract, so potentially yes. Try to get in contact with your former employee. Ask them why they aren’t working through their notice and see if they’ll reconsider.

If they leave without working their notice, you don’t pay them for the notice they would have worked.

Do remember, even if you’re frustrated, you can’t withhold pay as punishment for not working their notice. But you can deduct for anything that has cost you to replace them.

Can an employer withhold pay for mistakes

If you’re in retail and you notice some stock has gone missing, whether it’s stolen or lost, you should first talk to your staff member to find out what’s happened.

If you then have proof they’re responsible for the missing items, you’re allowed to deduct the total amount at 10% of the employee’s wage per payslip. Before you can go ahead with this, you must confirm this in writing to your employee. Although different rules apply if it is their last wage before they leave.

Remember, “Can my employer withhold my pay?” is a common question made by employees. In a situation like this, you may need to prove to them that you’re compliant with British law.

For extra support

Need more help with the complex topic of wage withholding? Get in touch with us today for expert advice: 0800 028 2420.