It is unlawful for employers to make deductions from a worker’s wages unless certain criteria are met.
This can be very frustrating and stifling for employers, who may well have very good moral reasons for making the deductions.
For example, your worker has just damaged the company lorry or quit after an event paid for by the company and you want to be able to recoup those costs – after all, why shouldn’t you?
Deductions can only be made in specific circumstances, these are:
This prior consent must be, you guessed it, in advance and in writing.
It is not enough to agree on deductions verbally (unless it is part of a verbal contract, see below), though many have tried.
The other very important, and sometimes overlooked, aspect is that the consent must be given prior to the event giving rise to the deduction.
So, for example, let’s just assume the worker damages company and client property after driving a forklift truck around the yard. It would be too late to try to get them to agree to the deduction after the event.
You would have to have that consent prior to the event, so before they hopped into the forklift truck and caused the damage.
To avoid having to obtain specific prior written consent before each event, contractual provisions tend to be utilized but they must be prepared very carefully.
They are typically handed out at the commencement of employment and are normally required to be signed and returned so a record is kept, avoiding any disputes about what was or was not agreed.
However, they do not always contain sufficient specificity of the deduction to be made, with many contracts being left unsigned.
Worse still is when verbal agreements, which can be just as legally binding, are relied upon.
Whilst contractually binding, they lack the same enforceability and simplicity as pointing at an express contractual provision.
Some deductions are authorised by statute and so avoid us having to worry about getting an agreement of any kind.
Whilst they offer assurance that they are there, the circumstances are limited, for example, they typically cover:
This might not cover the specific deduction you need.
When drafting deduction clauses, they should be done:
Sometimes, this means that the contracts of employment do not quite hit the mark because they may be drafted too generically.
This is where a prior written agreement would be helpful because this could be agreed upon prior to the event with clear wording as to the amounts involved and where the deductions will be made from, for example from salary.
We just have to remember when we might need to hand them out.
So, we would recommend that you check your handbook, policies, contracts and prior written agreements to ensure they are fit for purpose and meet the requirements to avoid any unlawful deductions from wages claims being made – if you make a deduction and the terms aren’t right, you will be on the hook at the Tribunal.
You will have to be mindful that where clauses are too harsh on the worker, they may be deemed to be penalty clauses and will therefore be unenforceable and lead to unlawful deductions.
In circumstances where unlawful deductions have been made, this can lead to:
The other, extremely detrimental, result could be that, whilst morally the worker should repay the money, if there is a finding of unlawful deduction from wages, your company will be unable to recover the money in another way, for example in the civil court.
For further assistance with any of the information contained within this article, please do not hesitate to contact the Bridge Employment Law team on 01904 949008 or email us at enquires@bridgeehr.co.uk.