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Employment Update for Small Businesses
September 2022

Dear Subscriber

Recently we have had a number of enquiries about deducting monies owed to the employer from an employee’s salary when they leave their employment. You would think that if the money was owed to you that you could just take it back from their salary, but it is not as simple as that. This month we explore this tricky issue and provide some practical advice that can help you recover money when necessary.
Please contact me if you would like to find out a bit more about any of the subjects raised in this update or if you need any help or advice.

Please forward this email to any of your contacts who might find it of benefit.

Peter Etherington
Tel: 01664 668164


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Peter Etherington
Unlawful Deductions from Wages
How to recover money owed
When an employee leaves your employment they are entitled to be paid for work they have done up to the date of termination and, if you have not given them notice, they may be entitled to pay in lieu of notice. In addition, if they have taken less holiday than that accrued by the termination date, they are entitled to pay in lieu of the outstanding holiday pay. That is all enshrined in law.

However, if the employee owes you (the employer) money, you are not allowed to deduct the money owed from their salary unless the employee has agreed to such a deduction. Even pay for holiday taken in excess of that accrued cannot lawfully be deducted unless this has been agreed (normally such an agreement on holiday pay will be included in the contract of employment).

It is important, therefore, to ensure that you have the employee enter into an agreement that allows you to make deductions from their pay to recover any monies you may loan them. Such an agreement will only be legally valid if the employee has signed it.

There are a number of occasions when an employer may wish to make deductions, such as:

  • To recover the cost of company property that the employee has broken or lost through their own negligence
  • To recover the cost of some training that had been provided by the employer shortly before the employee chose to leave
  • To provide for the repayment of a loan on a monthly basis and for the balance to be deducted on termination of employment

We would strongly advise you to ensure the employee signs up to an appropriate agreement before any monies are advanced. We can draft these agreements for you, so please contact us if you would like to find out more.

National Minimum and Living Wage
The current National Living Wage and National Minimum Wage rates are:

  • £9.50 per hour for workers aged 23 and over
  • £9.18 per hour for workers aged 21 to 22
  • £6.83 per hour for workers aged 18 to 20
  • £4.81 per hour for workers aged 16 and 17
  • £4.81 per hour for apprentices under 19 and those over 19 in their first year*

*N.B. Apprentices over 19 and who have completed at least one year are entitled to the appropriate rate for their age.