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The Wages Protection Act 1983 directs how wages must be paid and prevents unlawful deductions from wages. Deductions may only be made from an employee’s pay if they are required by law, agreed to by the employee, or are for overpayments in certain circumstances.
The usual lawful deductions are child support payments, PAYE, court fines, student loan repayments or other court directed deductions. These deductions can be made without consent from the employee, but for other deductions, an employer may only make one if; the deduction is to recover an overpayment in limited circumstances, the deduction is for a lawful purpose, is reasonable and the employee has agreed to or asked for the deduction in writing.
Obtaining an employee’s consent may be difficult in certain instances, specifically where costs or damages need to be recovered from an employee’s final pay following a termination or if they resigned in an attempt to avoid being held liable for damages falling from their actions whilst on the job
The challenge here is when an employee leaves their job and does not give their employer the notice required in their employment agreement. In such cases, an employer cannot make deductions or withhold wages or holiday pay unless the employee has given written consent.
If an employer deducts money from an employee’s final pay without written consent (freely given, i.e. the employer cannot threaten or pressure the employee to agree), the employee could take an action in the ERA to recover the money.
Its important then for employers to get written consent prior to making any deductions. Where consent is received then an employer may make deductions for such things as:
• Recovering money spent on the employee for training and/or upskilling.
• Relocation or immigrations costs.
• Damages or theft.
• Notice periods not completed
• Overdue staff accounts; or
• Legal costs incurred in ensuring that a matter of serious misconduct resulting in the employee’s dismissal is dealt with correctly
To make sure that consent is lawfully obtained you can include a general deductions clause in any employment agreement, but you must still consult with the employee before you make a deduction under such a clause.
The employee can vary or withdraw written consent to a deduction by giving notice in writing at any time. The employer must then vary or stop the deductions within two weeks of receiving the notice.
You must consider the risks and costs associated with making unlawful deductions from an employee’s pay, and if you find yourself in this situation you should seek the appropriate advice as soon as possible.
This information is not a substitute for legal advice, we recommend that if you identify problems in the areas listed you consult with someone before acting on any material you have read
