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Under section 13 of the Employment Rights Act 1996, it is unlawful for an employer to deduct wages from an employee unless the worker has agreed in writing to the deduction being made, or an employer is legally obliged to make the deduction (i.e. PAYE and National Insurance).
If an employer deducts wages without agreement from the employee in writing, this amounts to an unlawful deduction of wages and the employee can bring a claim in the Employment Tribunal. An example of where an employer may want to deduct monies from an employee is where there has been an administrative error and an overpayment of salary has been made. If there is no agreement in writing by the employee, then the only way the employer could seek to recover these monies would be by way of a claim in the County Court, which can be costly and time consuming.
The most effective way of dealing with such issues is to have a general ‘deductions’ clause in the employee's contract of employment, that would entitle the employer to deduct the monies in such an event. The clause however needs to carefully drafted and cannot be too onerous on the employee, so it is wise to consider the circumstances in which an employer may need to deduct wages, ensure that it is set out clearly in the contract and that the employee has understood and signed the contract indicating their agreement.
If you require any further information about what deductions you can make from employees' wages, or how you can legally make deductions, please contact us.
