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Unauthorised deductions

Part II of the Employment Rights Act 1996 governs unauthorised deductions from wages and has evolved (as a result of case law) to include complete non-payment of wages or salary.

Key points

  • Unlawful deductions from wages provisions cover 'workers', including employees and apprentices. Also included are people working under a contract and providing work or services personally to someone who is not a customer or client of the worker's profession or business. The provisions do not cover the genuinely self-employed.
  • Lawful deductions include income tax and NICs, any deductions authorised by the worker's contract and those deductions agreed in writing by the worker before the deductions are made.
  • Workers in the retail sector have additional protection against unlawful deductions and special rules apply to any deductions made in relation to 'cash shortages or stock deficiencies'.
  • Complaints regarding unlawful deductions from wages must normally be made to an employment tribunal within three months of the deduction.

Recent developments

  • The Government has announced plans to increase National Insurance contributions by 1.25% from 6 April 2022. The Government says this will be spent on the NHS and social care in the UK. Employers will need to prepare their payroll teams for these changes and communicate the impact on take-home pay to staff.
  • HMRC have requested that a message is included on all affected employees payslips between 6 April 2022 and 5 April 2023, that says as follows: "1.25% uplift in NICs funds NHS, health and social care". 
  • From April 2023, the increase must appear as a separate deduction on payslips as a “levy” and will be extended to working pensioners.