Can employers deduct wages for mistakes?

  • Pay & Benefits
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Peninsula Group, HR and Health & Safety Experts

(Last updated )

As an employer, can you deduct wages for mistakes your employees make? Find out in this expert guide about how to handle this workplace scenario.

The Employment Rights Act 1996 outlines that an employer should not make a deduction from wages unless it is a “relevant provision” of the employee’s contract or previously signed consent gets provided. This places an obligation on employers to ensure that staff members are fully paid in accordance with the terms of their contracts. As such, employees shouldn’t get punished for their mistakes with a reduction of their salaries.

Can an employer deduct wages for mistakes?

A common question from employees is: “Can my employer take money from my wages for mistakes?” The answer can be quite complicated. If an employee does make mistakes that are of significant detriment to the company, it should get approached through a typical disciplinary process. This is where the actions of the employee can be properly assessed and monitored. This can establish if you’ll need extra support. Deductions should only usually occur in retail environments when there has been a shortfall in till calculations. In this situation, an employer may reserve the right to take the missing amount out of the employee’s wage provided that the salary does not dip below minimum wage levels. They can also only remove up to 10% of the gross pay per pay period until the amount gets paid back. There may be situations where employers can ask employees to make contributory payments towards repairs for any tangible damage, such as covering the cost of insurance excess. Employers should bear in mind this would only be acceptable if such an expectation was clearly highlighted in the contract of employment. Any cost incurred by the employee would have to relate to their action. Due to this, contracts can’t contain penalty clauses that dictate fixed payments for such mistakes.

Can an employer sue an employee for a mistake

Generally, it’s unusual for an employer to attempt to sue an employee for a mistake. It’s usually considered an implied term within the employment contract the employee gets indemnified against proceedings brought against them for mistakes made during their employment. As case law outlines, where the risk of a negligent act by an employee gets covered with insurance, the employer can’t look to make that employee responsible. If the employee willingly caused a situation that resulted in property damage or injury, the employer can seek to bring criminal charges against them.

Is it illegal to make employees pay for mistakes

Employers should bear in mind it’s illegal to charge employees for their mistakes through wage deductions. If it’s found they paid their staff less than what their entitled amount in their employment contract, they could be liable to expensive tribunal claims for unfair deductions from wages.

Want more advice?

Need more help regarding charging employees for mistakes? Get in touch with us today on 0800 028 2420.


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