If you’ve made a mistake at work, you might be under pressure to make the situation right. But can an employer take money from wages for mistakes without your consent?
In this type of situation, it is vital to stay calm and know your rights. Some employers may feel entitled to recoup their loss. However, this can only be done in limited situations and there are legal protections regarding wage deductions.
Our guide will help you understand the rights of employers to recoup money after a mistake, and what you should do if you wish to complain.
See Also: Can a company withhold pay?
Can Employees be Made to Pay for Mistakes?
Employee mistakes have the potential to cost a business a great deal of money. Many employers feel they should be able to recoup this money from staff wages. It was their mistake so surely this is a fair solution?
The problem isn’t a simple one, however. There are laws in place to protect employees, in particular within the provisions in the Employment Rights Act 1996 regarding unlawful deductions from wages.
Employee Consent & Wage Deductions
An employer can’t deduct money from wages without employee consent. The only deductions which can legally be made are those allowed by law, for example tax and national insurance.
For an employer to lawfully make an employee financially liable for a mistake, there must be clear provision in the contract of employment, or payment should be agreed by the worker in writing before the deduction was made.
This means composing an agreement after the mistake has happened. The individual will sign it and agree to the deduction, or several deductions until the money is paid back. Employers must be sure that the wages never fall below national minimum wage as a result of the deductions.
If you are asked to agree to repay money for a mistake and feel uncomfortable, do not sign any agreements until you have obtained legal advice.
Source: Employment Rights Act 1996 S13.
Retail Workers
The Employment Rights Act 1996 puts additional protections in place for retail workers. Section 21 of the act puts limits upon deductions from employees salaries to compensate for cash shortfall or stock loss.
Employers have a cap on how much they can deduct from retail workers wages, which is set at 10% of their gross earnings. However, this limit doesn’t apply to final wages when an employee leaves or is dismissed.
Source: Employment Rights Act 1996 S21, S22
Unlawful Deduction of Wages
Employers need to be aware of their legal responsibilities when considering wage deductions from staff salaries.
Wage deductions are only legal in these scenarios:-
- When required by law. For example, National Insurance contributions and taxes.
- When agreed in the employment contract.
- In instances of overpayment by the employer.
- If a mutual agreement has been reached between the employer and the employee.
Outside of these scenarios, the deduction of wages becomes unlawful.
Even if your contract of employment makes provision for your employer to deduct money from your wages in relation to mistakes, this does not allow them to make whatever deduction they deem necessary.
They must follow proper processes. Should they fail to do so, you may be able to take them to court for unlawful deductions from wages.
If a contract of employment says money can be deducted when an employee causes the company a loss, the employer must:-
- Investigate the loss.
- Determine that the employee was responsible for the loss.
- Ensure the deduction is not more than the actual loss incurred.
- Not pay the employee less than national minimum wage after any deductions.
When an employer tries to make unlawful wage deductions and the employee decides to leave, they may be able to claim unfair constructive dismissal if they have more than two years service.
What to Do if Your Employer Intends to Deduct Money From Your Pay
If you’re facing a situation where your employer has stated they intend to deduct money from your pay, it’s vital to know your rights.
Take the following steps to protect yourself:-
Check Your Contract of Employment
Read your employment contract to see if it contains any clauses about wage deductions. Understanding your employment contract is vital. If there are clauses giving your employer the right to make deductions, you must have been made aware of them, and the terms must be specific and clear.
Do Not Sign an Agreement
Never feel pressured into signing an agreement to deduct your wages. You cannot be forced to sign it and your employer cannot take money without your consent.
Approach Your Employer
You should approach your employer in the first instance. Keep things professional and remain calm when doing so. Once they realise you are aware of your rights, they may well backtrack if they are in the wrong.
Give your employer the chance to justify the deduction or to reverse their decision – whichever action fits the situation.
Raise a Formal Grievance
If your discussions with your employer are not productive, you can raise a formal grievance. If you don’t know how to do this, consult your company handbook.
Alternatively, ACAS has a useful grievance letter template you can use to submit your objection formally.
Make sure you document all events and correspondence you have with your employer to keep accurate records of the dispute.
Seek Legal Advice
If your employer refuses to rethink the deduction, you should seek legal advice. You have rights and it is important to get sound advice regarding unlawful deductions.
They can help you with the next steps and try to resolve the issue away from a tribunal. Citizens Advice is a great place to start when it comes to unlawful deductions.
If Your Employer Has Withheld Your Wages
Perhaps your employer has already withheld your wages. This can cause financial stress and cause employees to be in debt. You should be aware of your options if a deduction has happened unlawfully.
In the first instance, have an informal discussion with your employer. Let them know you are aware of the legal protections against unlawful deductions, and give them an opportunity to correct the situation.
If your employer refuses you can take the following steps:-
- Submit a formal grievance and request money to be repaid.
- You can open a claim with an Employment Tribunal to start legal proceedings against your employer.
- You can pursue a right to compensation for any monies taken unlawfully.
- This should be done within 3 months of the deduction being made. If there was more than one deduction, the last date it happened can be used.
ACAS can offer advice on next steps to take to recover monies your employer has withheld.
Disciplinary Action for Mistakes
Rather than asking for monies to be repaid, employers should deal with costly mistakes via a disciplinary process.
A typical process for disciplinary action for mistakes would include these steps:-
- Your employer should first ask you about the mistake made.
- They might then decide to start the process for disciplinary action.
- This should be done in writing following either the ACAS Code of Practice or they may have their own written policy.
- The letter should outline the mistake that is thought to be made along with any other relevant information. A date for the disciplinary meeting will be included in the write up.
- Your employer should let you know of your right to have support at the meeting, a colleague or a trade union rep, for example.
- On the day of the meeting, everyone should put forward their arguments and thoughts.
- The employer will go away and consider what will happen next and then you will be informed.
What happens next will depend on several factors. Your employer will consider the severity of the mistake and any financial implications. They will look at your employment history with the company and go from there.
Possible Outcomes:
- No further action is to be taken. Your employer might decide you weren’t in the wrong or the issue wasn’t serious enough for further action.
- You need additional training. It might be that your employer decides you need further training to prevent the problem from happening again.
- You may be given less responsibility. An employee may be moved to another role within the department.
- The employee is suspended pending further investigation. In rare cases, your employer may not have come to a decision. Or perhaps last minute information came to the surface. In this case, suspension on full pay might be an option.
- A formal warning or a trial period may be introduced. Sometimes employees are given another chance in the form of a warning or being placed on a probationary period.
- You might be dismissed as a result of the mistake made. This should be done as set out in the contract.
