Employers are only permitted to deduct or withhold pay in certain circumstances. To ensure you are acting lawfully and not exposing the organisation to legal claims, it is important to understand the rules and legal risks of making changes to someone’s pay.
The fundamental terms of any contract of employment are that the employee provides the services and the employer pays for those services. This means that it will be extremely rare for an employer to justify withholding pay altogether. Equally, there are only limited scenarios in which an employer will be permitted to make lawful deductions from an employee’s pay.
If the employer is not allowed to lawfully withhold pay in the circumstances in question, this will be classed as an unlawful deduction of wages. This is where an individual has either been unpaid or underpaid their wages for a particular pay period. In this case, the employee may be able to bring a claim for unlawful deduction of wages.
In practice, in many ‘withholding pay’ scenarios, these will usually amount to nothing more than an administrative error which can be easily rectified by the employer. If staff have not been paid the amount they were expecting, they should always be encouraged to raise this with payroll first before taking any legal action. In this way, the employer can be given the opportunity to correct any mistake without recourse to tribunal proceedings.
In some cases, however, it may be that any deduction has not been made in error, but rather has been made intentionally by the employer because there is lawful basis to do so. In these circumstances, once an explanation has been provided to the individual concerned as to why a deduction has been made, this will again often resolve the matter quickly and easily.
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