Under the Employment Rights Act 1996, deductions may only be made from wages if they are required by law (eg. tax and National Insurance) or they have been written into your contract of employment.  Special rules apply to workers in retail employment (see below). If you think that your employer has not forwarded your income tax or National Insurance contributions to the relevant authorities, you should contact your local tax office as soon as you suspect this.

Where deductions are written into your contract of employment e.g. for misconduct etc, your employer must show you the terms of the contract relating to deductions before any deductions are made or give you separate written details of any deduction before it is made.

A deduction which is not required by law can only be made if you have given written agreement in advance.  If an employer fails to pay any wages owing to a worker, this may be treated as a deduction.

Workers not covered

If you work for someone else as part of their own business, for example as an independent contractor or freelance agent; are a member of the armed forces; normally work outside the UK or are a seafarer, you may not be covered by the Employment Rights Act.  If you are unsure about whether you are covered, you should seek advice.

Deductions not covered

Your employer can only make deductions from your wages without satisfying the conditions of the Employment Rights Act under the following circumstances:

• to recover an earlier overpayment of wages or expenses made to you by the employer;
• as a result of disciplinary proceedings provided for in law;
• as a result of you taking part in a strike or other industrial action;
• to satisfy a court order or Employment Tribunal decision requiring you to pay an amount to your employer but only provided you have given advance agreement to the deduction.

The rules covering deductions do not apply to payments made to your employer for social occasions or activities.

Right to an itemised payslip

All workers are entitled to a payslip, which should show how much you have earned before and after stoppages (tax & National Insurance).  Details of other agreed deductions e.g. for trade union dues, pension contributions etc. should also be included on the payslip. If you do not get a payslip you should first of all send your employer a grievance letter; see our factsheet Grievances for guidance on doing this. You can also complain to an Employment Tribunal, but if you don`t send a grievance letter first then any compensation you are awarded may be reduced.

What counts as wages?

Wages are any sums paid by your employer in connection with the job you are doing.  They include: bonuses or commissions; holiday pay; statutory payments e.g. Statutory Sick Pay or Statutory Maternity Pay: luncheon vouchers, gift vouchers or any tokens that can be exchanged for money or goods.

Attachment of Earnings and Liability Orders

Your employer will be able to make deductions from your wages if you have had an Attachment of Earnings Order made against you by the courts. Similarly, local authorities can obtain Liability Orders from the courts to allow them to instruct your employer to make deductions from your wages, e.g. for Council Tax.

Deductions for trade union dues

Your employer can make deductions from your wages for trade union dues provided that you have given written consent in advance.  Your union should let your employer know how much you have to pay.

Deductions from wages in retail employment

If you work in retail employment and are involved in the sale or supply of goods or services (inc. financial services) directly to the public, special rules apply to certain deductions.  Any deductions have to be agreed as explained at the beginning of this factsheet, but where deductions from your wages are for cash shortages or stock deficiencies your employer:

• must tell you in writing the total amount to be deducted for cash shortages or stock loss;
• can only make deductions on a pay day.  If your pay day is not a day that the business is open, your employer can only make deductions on your first working day after the pay day;
• cannot deduct more than one-tenth of the gross wage (ie. wage before deductions for tax and National Insurance) that you receive on a particular pay day.

The one-tenth limit does not apply to any deductions made from your final wage.  If there is an amount outstanding for shortages or deficiencies on the final pay day, your employer can deduct it all from your final wage, provided s/he satisfies the general requirements of the Employment Rights Act as detailed above.

Your employer cannot make any deductions from your wages for shortages that s/he discovered after more than 12 months.  If the deduction is one in a series of deductions resulting from a particular shortage and the first deduction is made within 12 months after the shortage was discovered, this rule does not apply.

If your employer operates a bonus scheme and pays a bonus if there are no losses of stock or cash, failure to pay this bonus may be treated as a deduction.  The law is quite complicated in this area, so you will need to seek advice.

What you can do if you think your employer has made illegal deductions

• Check your payslip, which should contain details of all deductions made by your employer.  Make sure you keep copies of your payslips safely as they are the only evidence you have of your earnings.
• Check your contract of employment.  This should tell you under what circumstances your employer will make deductions from your wages. See our factsheet Contracts of Employment for more information.
• Ask your employer why the deduction has been made. You could start by just asking verbally.
• If you have asked and your employer hasn`t answered your question, then you should  first of all send your employer a grievance letter; see our factsheet Grievances for guidance on doing this.
• If you are not satisfied with your employer`s response to your grievance then you can consider making a complaint to the Employment Tribunal about it. You normally have to do this within three months of the deduction being made, otherwise you will be too late.
• If you claim to the Tribunal, it will decide whether the deduction was illegal and will order your employer to repay you any money that has been deducted.
• Complaints about breach of contract and associated deductions from pay can also be made to the County Court.

Unfair dismissal

If an employer dismisses a worker because they complained about a deduction, the worker can claim unfair dismissal even if they have not been employed there for 12 months.

If you need more information about pay and employment rights, contact

Greater Manchester Pay and Employment Rights Advice Service

( 0161 839 3888 phone and answer machine)

We provide telephone advice only and cannot see people face to face.

or visit our website: www.gmemploymentrights.org.uk

Trade Unions

Trade unions help workers to get better pay and work conditions.

For further information contact us, or:

North West TUC, Suite 506-510, The Cotton Exchange, Old Hall Street, Liverpool L3 9UD

Tel: 0151 236 5432

Greater Manchester Pay and Employment Rights Advice Service is an independent research and information body funded by all local authorities in Greater Manchester under the AGMA grants schem

August 2010