Disputes about the payment of wages are commonplace. Most of them are about non-payment, late payment, or deductions from wages. At some stage, most employers will come across this issue. ‘Goodwill’ of employees is relied upon in some instances, in particular, banking transactions on late payments.

In ROI, in order to deduct from employee wages, an employer must:

  • Have such a clause in the contract of employment that exists prior to the deduction(s)
  • Have consent from the employee (this should be evidenced in writing) and
  • The employee must be put on notice in writing one week in advance of the deduction

Deductions as per s.5(2)(a)(i)->(iv) as the word “and” is used on each occasion:

(2) An employer shall not make a deduction from the wages of an employee in respect of –

(a) any act or omission of the employee, or

(b) …

unless –

(i) the deduction is required or authorised to be made by virtue of a term (whether express or implied and, if express, whether oral or in writing) of the contract of employment made between the employer and the employee, and

(ii) the deduction is of an amount that is fair and reasonable having regard to all the circumstances (including the amount of the wages of the employee), and

(iii) before the time of the act or omission or the provision of the goods or services, the employee has been furnished with—

(I) in case the term referred to in subparagraph (i) is in writing, a copy thereof,

(II) in any other case, notice in writing of the existence and effect of the term,

AND

(iv) in case the deduction is in respect of an act or omission of the employee, the employee has been furnished, at least one week before the making of the deduction, with particulars in writing of the act or omission and the amount of the deduction, and

All well and good, but what about training agreements? Here are some common questions in regards to this:

Common questions

  • I have an employee doing a course that I’m subsidising via salary deduction, what if they leave my company?
  • How much can an employer deduct?
  • Can I deduct 100% years down the line?
  • Why do training agreements reduce the percentage an employee has to pay based on their service after completing the training?

Employers will often want to deduct 100% of training costs for a number of years after the training has been completed e.g. in circumstances where the employee leaves the business. Whilst the Act does not expressly prohibit this, it does state that the deduction must be “of an amount that is fair and reasonable having regard to all the circumstances” [s.5(2)(b)(ii)].

It’s very difficult to argue that an employer can reasonably deduct 100% of training costs for a number of years after the training has been completed – although obviously this may be justifiable in some circumstances, particularly where the employer funds an expensive or lengthy training course. In these circumstances, the employer runs the risk of the employee taking a Payment of Wages claim and recouping all of the monies.

Are there any other general requirements that employers ought to be aware of?

An employer can only make a deduction where:

  • It’s authorised by law (e.g. tax deductions)
  • It’s authorised by term of the employee’s contract e.g. a deductions clause, or a lay-off clause, etc – OR
  • The employee has given their prior consent to the deduction (e.g. a training agreement)

If the deduction is due to an act or omission of the employee (e.g. damage to company property), then the employer must provide the employee with one week’s written notice of the deduction. This applies even where there’s a deductions policy. If this isn’t provided, then the employee can recoup the monies through a Payment of Wages claim. This written notice is only required in respect of acts or omissions of the employee and is not required in respect of the provision of goods and services (because the employee has already signed an agreement in respect of same).

If the deduction is for compensation due to an act or omission of the employee, or for the provision of goods and services, the deduction must not exceed the loss the employer has suffered. In addition, all deductions must be reasonable in the circumstances.

The Payment of Wages Act does not regulate deductions due to an overpayment of wages. Therefore, if an employee has been overpaid, then there’s no need to check if there’s a deductions policy, no need to give one week’s written notice and so on.

However, that said, the Act will ‘kick in’ if the employer deducts more than they should have.

Please remember that you can reach one of our experts via our 24 Hour Advice Service on 01 855 50 50 should you have any questions or concerns about these issues.