A significant number of UK workers encounter issues with being underpaid at work each year. If your employer makes deductions from your wages, or makes errors with payroll it is vital to understand your rights.
There are strict protections in UK law to prevent unlawful wage deductions, and underpayment of wages in some scenarios.
Our guide will outline your rights, and the laws which are there to protect your income.
Your Right to National Minimum Wage
The national minimum wage is there to ensure all age groups are receiving a fair wage and is set by the government each year. If your wages dip below this rate, your employer is breaking the law.
When deductions are made from your wages, they must not take the number below NMW. Your hourly rate should also be in line with the current rates for the minimum and living wages. These rates are evaluated yearly and updated so it is important to be aware of these changes.
Should your calculations show that you are being underpaid, you should first raise this with your employer. They are legally required to pay back monies owed for as long as the mistake has been occurring.
How to Check You’re Getting NMW
Working out if you are being paid less than the minimum wage is done by taking the average. You can use the Online Calculator to ensure your wage is fair.
This number is based on your pay before the deduction of tax, national insurance contributions and pension schemes.
There is a government scheme in place, called Check Your Pay. Here, you can compare your rates to the legal minimum rates. This is in place to ensure employers are not underpaying their staff and are meeting the UK legal requirements.
What to Do if You’re Not Getting Minimum Wage
You may be able to resolve issues around being underpaid with your employer informally. The mistake may have been an error and could be sorted quickly without fuss.
Citizens Advice can offer advice if you are reluctant or wary of confronting your manager. Some people fear they might lose their job or be otherwise treated unfairly. However, employers have a duty of care, including putting their staff on a fair and lawful wage.
When talking to your employer doesn’t work or you don’t feel able to take this route, you have two options available:-
- You can contact HMRC who can advise you what to do next. Or you can go onto the government website and fill in the Complaints Form. This will trigger an automatic process where HMRC will investigate the complaint.
- Your other option is to start a claim with an employment tribunal. You can do this under a claim of unlawful deductions.
It is important to note that you must choose one of these options. You cannot be pursuing both a complaint to HMRC and also to the tribunal at the same time.
All employers and their employees should be aware of lawful and unlawful pay deductions. Any deductions not included in the lawful list means they are not permitted.
Lawful pay deductions include:-
- National insurance
- Student loans
- A clause in the contract.
- Something has been agreed in writing.
- Repayment of an accidental overpayment by employer.
- Time off for strikes.
- Mistakes made in retail can be lawfully deducted.
Any deductions that are made and not included above, are unlawful and you should raise a grievance.
Unlawful Deduction of Wages
Anything that is an unlawful deduction should be brought to the employer’s attention as soon as possible. The Employment Rights Act of 1996 protects workers against unlawful deductions, and there are severe penalties for breaches of the law.
Below are some possible scenarios where an unlawful deduction may have taken place:-
- Holiday pay was not given or paid incorrectly.
- Statutory sick pay or enhanced pay is not given or paid incorrectly.
- Bonuses withheld
- Commission withheld
- Parental or maternity pay is incorrect.
- Not paid for the hours they have worked.
- Overtime is not paid when it should be.
Anything that is deducted unlawfully should be brought to the employer’s attention immediately. It may be an honest mistake, particularly if something like this has never happened before.
If nothing is done to fix the problem, you may wish to take it to a legal professional who can assist you with recovery of monies owed.
When Your Pay is Lower Than Expected
What to do when your pay is lower than you expected or calculated? Perhaps your overtime hasn’t been accounted for, or your holiday pay has been miscalculated.
Firstly, you should review your payslip so you can see the breakdown of wages. If you do not receive a payslip, you should request one so you can further investigate.
There can be many reasons for your pay being lower than you expected.
If Your Employer Has Paid You Late
Being paid late by your employer is a frustrating and stressful situation to find yourself in. Not having funds in your bank on the agreed day will effect your finances badly. This can lead to becoming overdrawn or bank charges being applied.
If your pay has not been issued by the agreed date, your employer is in breach of the contract. You should continue working but also try to resolve the error or oversight. You can talk to the HR department if your workplace has one.
Refusing to work until you have been paid might seem tempting. However, you would then be in breach of your contract as well. This could, potentially, lead to dismissal.
You can raise a formal grievance if the problem isn’t resolved or happens regularly. ACAS may also be able to help in more complex situations.
If You Have Not Been Paid for All Hours Worked
A common reason for being underpaid is due to an incorrect entry of the hours you have worked. Such mistakes are easy to make and not always picked up when payments are processed.
This is one reason it’s important to keep your own record of all hours you work during each pay reference period. You should also receive a payslip which will contain a detailed breakdown of all monies owed. It will also detail any deductions made.
It’s also a good idea to check your contract for any conditions that might limit how much you are paid. For example, employers have no legal obligation to pay staff for overtime.
If the payslip and bank balance don’t tally and you spot a mistake, you should bring this to the attention of your manager or Payroll ASAP. It should be rectified as quickly as possible.
If Your Employer Has Withheld Pay
There might be situations where you realise you have had some pay withheld. You should check first that the reason wasn’t a lawful one, such as tax or national insurance contributions. Next, approach your manager or HR and have an informal chat with them.
Wages should include anything that you have a statutory right to. This includes holiday and sick pay, notice periods, maternity or paternity pay, bonuses and overtime if it is within the contract. Should deductions be made to recoup an overpayment, this should be brought to your attention first.
In the event an informal chat doesn’t work, you can raise a grievance as per company policy. If the dispute can’t be resolved, you can seek legal advice and instigate a claim on the grounds of unlawful deduction of wages.
If Employers Withhold Your Final Pay
Employers are not permitted to withhold your final pay. All hours you have worked should be paid to you. This is the case even when it is your final wage after working your notice period.
Your final pay packet may be different to previous ones and should include all monies owed. This includes accrued holidays, redundancy pay and any bonuses. If there have been deductions made, you should check your contract. There might be a clause which states training should be repaid, for instance.
Act as quickly as possible to sort this issue out as you only have 3 months less one day to make a claim. This 3 months less one day starts from the day you received the incorrect pay. An informal chat may work but if not, you can take a more formal approach.
How to Claim Back Underpayment of Wages
It can be an incredibly stressful situation to be in, but you have rights when you have been underpaid. The Employment Rights Act 1996 offers legal protections so that workers receive what they are owed and are treated fairly.
You should always try the informal approach to resolve underpayments first. This can help keep the working relationship professional and civil. It won’t always be possible though which is why there are other avenues to explore.
You should follow the company procedure for raising a formal grievance. You can also seek advice from ACAS who can act on your behalf. When all this fails, it is time to think about complaining to HMRC or going to an employment tribunal.
How Far Back Can Underpayment of Wages Be Claimed?
You must make a claim for unlawful deduction of wages within 3 months of the situation occurring. This would be the payday for most employees. Should there be more than one occasion, you have 3 months less one day of the last unlawful deduction to make a claim.
This means, for example, your final incorrect pay was received on the 16th of August. You have until the 15th of November to have claimed, including contacting ACAS for early conciliation.
In 2015, the rules changed regarding backdating underpayments. It used to be that you could claim for up to 6 previous years. Now, however, this has been cut to just 2 years. This is why it is important to act as soon as you notice it happening.