16th December 2009


 Issue No.  2009/27




An Employer can only make deductions from a Worker’s pay in limited circumstances.  These are when the deduction is: -  
  • authorised or permitted by a statutory provision (e.g. tax and national insurance);
  • authorised by virtue of a provision in the Worker’s contract. (The contractual provision has to be clear that the deduction will be made from the worker's wages and the Employers must also be able to show that the event justifying the deduction has occurred);
  • authorised by the Worker, signified in writing  (The worker's prior written consent has to be given prior to the event giving rise to the deduction, not just prior to the deduction itself);
  • to reimburse the Employer in respect of an overpayment of wages or an overpayment in relation to expenses incurred by the worker in carrying out their employment;
Any other type of deduction is unlawful and the Worker can make a claim to an Employment Tribunal. 
New Powers
Earlier this year the Employment Tribunal’s powers were increased to allow not just the power to Order the Employer to pay back the amount unlawfully deducted, but also to order compensation for any consequential losses arising as a result of the unlawful deduction.  The most obvious consequential loss will be Bank Charges but could run to “such amount as the tribunal considers appropriate in all the circumstances to compensate the worker for any financial loss sustained by him which is attributable to the matter complained of”.
Bank charges might seem a fairly slight additional liability but what else could feature?  If the deduction was unlawful and the Worker consequently could not pay his rent and was evicted, or had his house repossessed if he missed mortgage repayments; how far would the Tribunal go to compensate the Worker?  It has the potential to be significant!
We are monitoring to see how Tribunals are dealing with this new power and we will keep you updated.
And Finally - Non Payment of Redundancy Payment
Similar to the above, the Tribunal can award compensation in respect of consequential loss arising if an Employer does not make a Redundancy Payment, to which the Employee is entitled.
As usual if you need any advice on the above or any other HR or Employment Law matter please call us on 08456 446006.




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