Unlawful Deduction of Wages

Caragh Bailey
25/02/2021
Unlawful Deduction of Wages

Can an employer deduct money from your wages without consent?

Generally speaking, no, your employer can't make deductions from your wages without your consent, other than normal Tax, National Insurance and Student loan payments. However, there are a few exceptions listed below.

What are the permissible deductions under the Payment of Wages Act?

Your employer is allowed to make deductions if:
  • Its a legal requirement (Tax, NI, Student loan repayments)
  • You have agreed to it in writing
  • Your contract of employment allows them to
  • You are due to pay a statutory payment to a public authority. (For example, HMRC require you to pay a sum each month to balance miscalculated tax from the year before).
  • Absences where you have been on strike
  • You were overpaid wages or expenses and the deductions rebalance this
  • A court has ordered the deduction

Your statutory right to national minimum wage is not affected. This means that any deductions cannot reduce your pay below the minimum hourly rate that applies to you.
These are the only permitted exceptions:
  • Tax and National Insurance
  • Something you have done, where your contract says you are liable for it. For example, your pay be deducted by the amount that your till is short by.
  • (Your employer can only deduct 10% of your gross pay per pay period to cover shortfalls such as this, if your till is short by more than 10% of your pay they will have to deduct the rest from the next pay package, and so on).
  • Repayment of a loan or an advance of wages
  • Buying shares in the business
  • Accommodation provided by your employer
  • Your own use. For example pension contributions or union membership fees

Is it illegal for an employer to deduct pay?

If your employer makes deductions that are not covered by the permissible deductions listed above, or those deductions reduce your pay below the minimum wage (except for in the permitted exceptions), then these would be an illegal deduction of wages.

For example:
  • Unpaid bonuses
  • Unpaid commission
  • Untaken holiday
  • Unpaid pension contributions. (ie: If you have not opted out of any pension scheme, since auto-enrolment began in April 2017, but your employer has not enrolled you and paid the relevant contributions)
  • Late payment
  • Reducing your hourly rate as part of a disciplinary or performance management plan

Unlawful deduction of wages from Employment Law Friend Remember that these deductions are allowed if your contract of employment allows them.

how do I make an unlawful deduction of wages claim?

You can bring your claim to the employment tribunal or to the civil court. You will need to know if you are bringing any other claims against your employer at the same time, and how much money you are claiming for, in order to decide tribunal or court

Most cases will go through the tribunal. (Read more about the employment tribunal process here).

Is unlawful deduction of wages a breach of contract?

Unlawful deduction of wages is a breach of contract. In most cases you can bring both claims to the employment tribunal together. However, there is a £25 000 limit on any award you may win for breach of contract claims at tribunal. There is no cap on breach of contract claim awards at civil court
(Click to read more about breach of contract)

Frequently Asked Questions
The employment tribunal time limit is 3 months. If you miss this deadline you may be able to claim at the civil court for up to 6 years.
Usually you will only win back the money that was unlawfully deducted. However, in some cases you might also get some compensation for other financial loss as a result, such as bank charges.
If your employer delays your pay without your written consent (including your contract of employment) they are breaking the law. However, this is usually due to a mistake or technical error. The best thing to do is to check there are no problems with the bank and then gently make your employer aware that you haven't received your pay, they will probably rectify this as quickly as possible.

If your employer refuses to pay you once they realise their mistake, they are breaking the law. However, unless they owe you a lot of money and delay by a long time, it is unlikely to be worth bringing a legal claim against them. Of course, if the delay in your pay causes big problems, such as forcing you into mortgage defaults or an unplanned overdraft, there may be more at stake that would make it worth while to raise a claim; the employment tribunal can order your employer to pay you for consequential loss such as bank charges.

Contact us to arrange a review of your case from one of our specialist employment solicitors.


Has your employer made an unlawful deduction of wages?

There is much more to winning your case than simply being in the right, our specialist employment solicitors know all the laws and tactics, to make sure you get the best chance at a fair settlement. Get in contact with us and see how we can help.

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