Can Your Employer Deduct Your Salary?

Your employer can, in some circumstances, deduct your pay. Find out if your wage deductions are authorised or unauthorised, and how to get your money back.

What counts as authorised deductions?

In some cases, your employer can take money out of your pay. These are known as ‘authorised deductions’. Usually, your employer is legally obliged to make these deductions.

If you’re unsure why money has been deducted, the best thing to do is talk to your employer to find out why. It could be a genuine mistake, or they may have a good or authorised reason.

Authorised deductions include:
  • Statutory deductions

Statutory deductions are those that your employer must make, by law. Income tax and National Insurance fall into this category. They should be labelled as such on your payslip. If you think you’re paying too much tax, you may be on the wrong tax code – the code used to work out how much tax you should pay. Chat to HR or call HMRC to make sure.
  • Student loan repayment

If you went to university, your student loan – or ‘graduate tax’, as Martin Lewis calls it – will be taken directly from. The amount you pay will depend on when year you started your course. Plan 1 is for those who began before September 1st 2012, who must pay 9% of their salary if they earn over £1615 a month or £372 a week, over 25 years. Plan 2, for those who started after September 1st 2012, will pay 9% of their income if they earn £2124 a month or £511 a week, over a 30-year period. Post-graduate loans are charged at 6% once you get paid £1750 a month/£404 a week or more.
  • Pension contributions

Legally, your employer must enrol you into a workplace pension if you’re an employee over the age of 22, you earn at least £10,000 a year, and you usually work in the UK. This is separate from your personal and basic state pension. This is an opt-out scheme, meaning if you don’t specifically ask to be taken out of the scheme, your contribution will be automatically deducted from your pay. The amount you’ll pay depends on the type of pension you have, and also sees your employer and government top-up your pension pot.
  • Court order debts

Sometimes a court may decide that, in order to repay your debt, a sum will be deducted from your wages each month. Your employer must abide by this ruling. However, if your financial circumstances change, you may be able to apply to the courts to change the order using the government’s forms.
  • Accounting errors

Mistakes happen – and if your employer has paid you too much, they’re well within their rights to take that money back. If you notice you’ve been paid the wrong amount, you should inform HR straight away. Don’t spend it!
  • Money you owe

If you owe your employer money for whatever reason, they’ll be able to deduct that directly from your pay. This should be agreed upon in advance. This also includes property damage or loss – if you break your work phone or laptop, for instance, they could deduct the amount to replace it.
  • Industrial action

An employee who has engaged in lawful industrial action may see a deduction for the hours they’ve missed from work.

What are unauthorised deductions?

Unauthorised deductions, as the name suggests, are deductions from your salary or wage that your employer has absolutely no right to make. If you’ve worked for it and it isn’t authorised, it’s against the law for an employer to withhold or deduct your pay.

Talk to your employer immediately if this has happened.

Excluding authorised deductions, an unauthorised deduction occurs when:
  • It’s not mandated by law
  • It isn’t in your contract
  • You didn’t agree to it in writing

What should I do if deductions have been made?

Always raise the matter with your employer when a deduction has been made. They’ll be able to explain why pay is missing, or if the payroll department has made an error, they’ll be able to rectify the mistake.

If you disagree with a deduction, you might want to make an unpaid wages claim. In the legal world, ‘wages’ usually count as:
  • Your basic salary or wage
  • Holiday pay
  • Statutory sick pay
  • Statutory parental pay
  • Commission
  • Tips
  • Redundancy pay, notice pay, and pay in lieu of notice
  • Any money your employer owes you

You can’t just take your employer to an employment tribunal. The process, instead, sees you inform the independent body for employees and employers, ACAS.

The organisation will then ask you and your employer to attend early conciliation, to see if a legally binding agreement can be mediated between both parties. If the talks break down, you’ll then receive a certificate permitting you to take the case to a tribunal.

However, if you’re seriously considering making a claim for unpaid wages, it’s worth first discussing the issue with an employment solicitor. They’ll advise on whether you have the right to make a claim, and how best to do it.

Tribunals can be stressful, confusing, and take up a lot of time, so you’ll want to make sure you’re fully prepared – a solicitor will help you make a success of your claim.

The Law Superstore lets you compare and connect with employment law experts just by filling in a few details in our quick quote form.

In the context of understanding and managing payroll deductions, utilising a payroll calculator can be exceptionally beneficial. A payroll calculator helps both employers and employees by providing clear insights into the net pay after deductions. For employees, it offers a way to independently verify the accuracy of their pay slips against their contractual entitlements and statutory deductions like tax and National Insurance contributions.

Employers can leverage payroll calculators to ensure transparency and accuracy in their payroll processes, thus reducing the likelihood of errors that could lead to disputes. These tools can accommodate various payment structures and deduction types, making them versatile for different employment scenarios.

Can your employer deduct money from your wages?

Is it permissible for an employer to make deductions from an employee's wages? In certain circumstances, employers are legally allowed to deduct money from an employee's wages. These include situations where it's required by law (e.g., National Insurance contributions), where it's stipulated in your employment contract, or where you've given prior written consent for deductions. However, there are strict legal guidelines governing these deductions to protect employees from unfair wage reductions.

What is an unlawful deduction of wages?

What constitutes an illegal deduction from wages? An unlawful deduction of wages occurs when an employer deducts money from an employee's salary without a legal basis or proper authorization. This includes any deductions not covered by statutory requirements, contract terms, or without the employee's explicit written consent. If you believe you've been subjected to an unlawful deduction, you may have grounds for a legal claim.

Can my company reduce my salary?

Is it within a company's rights to decrease an employee's salary? A company can reduce an employee's salary, but this action is subject to certain legal conditions. Primarily, the reduction must be agreed upon by both the employer and employee, typically requiring a modification of the employment contract. Without mutual consent, a salary reduction could be deemed unlawful. It's important for employees to understand their rights and seek advice if they're facing a unilateral salary reduction.