Making and checking deductions
When an employee is paid, they should check their payslips for deductions. If they have not been paid the amount they were expecting, they should talk to their employer first to check what's happened.
This gives the employer the chance to:
- explain why a deduction has been made
- correct a mistake
When an employer can make deductions
By law (Employment Rights Act 1996), an employer can only make a deduction from someone's wages if:
- it's required by law – for example tax or a court order
- the employment contract specifically allows the deduction
- it was put in writing and agreed beforehand
- they overpaid the employee by mistake
- it's something the employer agreed to pay on behalf of the employee – for example a trade union subscription
- the employee missed work because they were on strike or taking industrial action
Check any written agreements to see if a deduction is allowed. For example, an employer can deduct money for training costs from their employee's wages if it's agreed in the contract or in writing beforehand.
What payments can have deductions
An employer can make deductions from someone's wages. This includes their:
- monthly, weekly or hourly pay
- holiday pay
- statutory payments – for example statutory sick pay (SSP) or statutory maternity pay
- bonuses or commission
An employer cannot deduct money from payments that are not part of someone's wages. This includes:
- loans – for example a pay advance for a season ticket
- pension payments
- redundancy pay
- tips and other gratuities
Limits to deductions if you work in retail
An employer can take a maximum of 10% of someone's weekly or monthly 'gross pay' (pay before tax and National Insurance). This is to cover any till shortages or stock shortfalls.
This limit does not apply to someone's final pay if they leave their job.
The employer must let the employee know in writing if they owe them money. They must explain how they'll claim it back before the next pay day.
The employer must reclaim the money within 12 months of finding the shortage or shortfall.
When a deduction can take wages below the National Minimum Wage
Deductions must not take someone's pay below the National Minimum Wage, unless the deduction is for:
- tax or National Insurance
- something an employee's done which their contract says they’re liable for, such as damage to a vehicle through reckless driving
- repayment of a wage advance or loan
- an overpayment made by mistake
- buying shares, other securities or share options in the business
- accommodation being provided by an employer – find out more about accommodation deductions on GOV.UK
- something the employee benefits from – for example trade union subscriptions or pension contributions
Income Tax and National Insurance deductions
If someone is legally classed as an employee or worker, the employer must:
- deduct tax and National Insurance (NI) contributions from their pay
- pass these on to HM Revenue and Customs (HMRC)
If an employer is not passing on these contributions, you can contact the HMRC helpline.
People who are self-employed organise paying tax and other deductions themselves.
Find out more about:
If you do not agree with a deduction
If an employee disagrees with a deduction, they should first try to raise it with their employer.
If they've not been able to resolve the issue with their employer, they might be able to make a claim to an employment tribunal.
For example, they might be able to make a claim for:
- unlawful deduction from wages
- breach of contract, if they're no longer employed
How far back you can claim
There are strict time limits for making a claim to an employment tribunal.
If an employer made 1 wrong deduction, the employee has 3 months minus 1 day from the date of the deduction to make a claim to an employment tribunal.
If several deductions were made in a row, the employee has 3 months minus 1 day from the date of the most recent deduction.
The employee can claim up to 2 years back as long as there's less than 3 months between deductions.
Get more advice and support
If you need more advice about deductions, you can:
- contact the Acas helpline
- talk to a trade union representative, if you're a member