If an employee claims you’ve unlawfully deducted an amount from their salary, then unlawful deductions of wages claim could get made against you. If this happens, what is your legal standing, and how can you avoid future disputes with your staff?
Employee wagesFirst off, what counts as a wage? The Employment Rights Act 1996 (ERA 1996) classes wages as sums of money paid to employees for the tasks they complete. A wage includes salary, holiday pay, bonuses, or commission as part of their contract (this can sometimes include one-off payments, such as any accrued overtime).
Can an employer deduct wages without consent?This is a common question, but the ERA 1996 protects employees and workers. Sections 13-27 explain procedures and the situations in which you can legally deduct wages. You can only deduct wages based on one of three conditions. The Acas unlawful deduction of wages clarifies this as:
- British law requires it, such as income tax, national insurance deductions, and student loan repayments.
- The employee’s contract authorises it, although the staff member will need a written copy of these terms and have them explained to them. Remember, a signed agreement to the terms puts you in the best position.
- The employee has consented to the deductions in writing.
Unlawful deduction of wagesThere are several illegal deductions of wages employees may face. These include:
- Unpaid bonuses.
- Unpaid, or underpayment, of commission.
- Untaken holiday pay.
- Delayed wage payments.