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Employers are running the risk of legal action by making unlawful deductions from wages.

Published 21 November 2015

Instances of workers being docked pay for praying, taking cigarette breaks and going to the toilet have hit the headlines in recent years. Employees have also complained about not being paid at all.

And following a ruling by the European Court of Justice employers are also now facing huge bills to settle claims for backdated holiday pay, which was calculated incorrectly.

Employees who believe they have not been paid in accordance with their contract should at first raise and attempt to resolve the matter informally with their employer.

The law protects workers from having unauthorised deductions being taken from their wages, and an aggrieved worker should lodge a formal grievance before making any claim to an Employment Tribunal.

Wages includes commission, bonuses, holiday and sick pay. Employees who have been suspended are also entitled to full pay, unless the employment contract states otherwise.

Businesses will struggle to defend deductions where it is not in accordance with the contract. A deduction from wages is unlawful if:

  • It is not required or authorised by legislation.
  • It is not authorised in the employment contract.
  • The employee has not consented in writing before it was taken.

However, an employer can make deductions where:

  • An employee has been genuinely overpaid.
  • An employee took part in industrial action.
  • A court order from an Employment Tribunal authorises it.

A number of court judgements in the past 12 months means employers should have reviewed and updated, if necessary, how holiday pay is calculated. Previously overtime and commission were not factored into statutory holiday pay calculations.

The introduction of The Deduction from Wages (Limitation) Regulations 2014 has placed a two-year cap on claims for backdated deductions from wages for holiday pay, for claims lodged after 1 July 2015. This means that the period that the claim can cover will be limited to a maximum of two years.

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For employment law advice or if you are affected or want information and support by any of the issues in this article please give us a call. 


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