Professional July/August 2019

PAYROLL INSIGHT

Deductions from pay

SamanthaMannMAATMCIPPdip, CIPP senior policy and research officer, discusses the legalities

W hen I think about the subject of deductions from pay, several words spring to mind: statutory, contractual, voluntary and unlawful. Different words that relate to different situations, but all have the common theme, reducing the gross pay – whether to calculate net pay or indeed for some other compliance reason. Over the years deductions from pay have been the subject of many disputes in courts and tribunals, between employer and employee. Legislation provides for specific protection to individuals against: ● ● unauthorised deductions being made from their wages, which includes a non- payment of wages, and ● ● having to make payments (other than by deductions) to their employer. This protection was originally provided by

the Wages Act 1986 but is now consolidated within the Employment Rights Act 1996 (‘the Act’). The Act also gives employees and, since April 2019, all workers the right to receive an itemised pay statement at or before the time at which any payment of wages or salary is made. Certain basic information relating to deductions must be shown in the statement which includes the amount of any variable and any fixed deductions from the gross amount and the purposes for which they are made. Where a fixed deduction is being made it is sufficient to show only a total figure of the fixed deductions, so long as an individual breakdown is provided at least every twelve months and whenever a change occurs. The Act sets out the rights of employees

not to suffer unlawful deductions from wages. If a deduction that is within the scope of the legislation is made without authorisation the employee can make a complaint to an employment tribunal that there has been an unlawful deduction from his or her wages. Unlawful deduction claims made to employment tribunal provide a consistent reason for claims being made. The Act also prescribes similar rights in respect of payments that the employee makes or is required to make to his or her employer outside of the payroll, as well as additional requirements in respect of deductions made where the employee is in retail employment in respect of cash or stock shortages. However, the rights in respect of payments the employee makes (or is required to make) to his or her employer are relevant because they mean that an employer cannot avoid the law on deductions from pay simply by persuading/ coercing the employee into making such payments rather than treating them as deductions. Section 13 of the Act provides that:

...right to receive an itemised pay statement at or before the time at which any payment of wages or salary is made

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| Professional in Payroll, Pensions and Reward | July/August 2019 | Issue 52

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