When can an employer withhold wages?

Only in exceptional circumstances can an employer withhold wages. The fundamental terms of an employment contract are that the employee provides the services and the employer pays for those services. 

What should you do before seeking legal advice?

1. Check your documents to see if you have given your employer authority to deduct that money. An employer cannot lawfully deduct money from an employee’s wages unless the employee has agreed, in writing, that the employer can do so.
    
2. Write to your employer and state that you are owed overtime, state what is owed to you and when it should have been paid to you. Include supporting evidence e.g. timesheets, overtime policy, contract etc. Provided the overtime is properly payable to you then you can make a claim for unlawful deduction of wages against the Company.
    
3. You have 3 months less one day to make a claim to the Tribunal.
   If you do not receive a response to your letter say within 7 days then contact ACAS Early Conciliation to commence the early conciliation process as this is a requirement before you issue a claim in the Tribunal. If you are not able to reach an agreement during this process (e.g. they do not co-operate and you don’t get paid) then you will need to consider issuing a claim.

Sometimes the employee is entitled to be paid even when he has been absent.  For example, all employees and workers are entitled to 5.6 weeks’ paid statutory leave and statutory sick pay (if they qualify).   Where an employee has been suspended he will be entitled to be paid full pay.

Employers may lawfully withhold wages in the following circumstances:

• Where there is a written express contractual right to do so.
• Where the employee refuses to work, is on strike or will only “work to rule” (industrial action short of a strike) where he withdraws his goodwill and only provides part service.  For an employee to be entitled to pay he must comply with the terms of his employment contract by undertaking all his duties.
• Where the employer has previously overpaid the employee.  For example, if on 1 February the employer miscalculated the employee’s wages and overpaid him by £500, the employer is entitled to deduct that £500 from his next pay packet.
• Where the employer withholds wages, other than in the circumstances above, an employee (or worker) has the right to make a claim in a tribunal for unlawful deduction from wages.

Before an employee can bring such a claim an actual deduction must have been made.  The employee cannot bring a claim on the basis that the employer has merely threatened to deduct wages.  However, should an employer threaten to unlawfully deduct money from his employee’s pay or not to pay him at all, that threat would entitle the employee to claim an anticipatory breach of contract, allowing him to resign and claim constructive dismissal.

Employers must be careful where the employee’s contract is terminated but he or she still owes the employer money (a season ticket loan for example), as the employer does not have a contractual right to deduct that money from the employee’s wages.  If the employer deducts, say £1,000, from the employee’s final wages in settlement of the loan, and the employee makes and wins a claim for unlawful deduction, the employer will have to pay that £1000 back to the employee. The sting in the tail is that the law prevents an employer recovering that £1,000 from an employee in the civil courts.

In summary, an employer will have to have a good reason to withhold wages.  If there is such a reason, there should be a clear unequivocal clause in the employment contract, which will have been signed by the employee, that allows the employer to do so. Call Reggie today for a fixed fee offer.

f you are concerned about the possibilities of facing any of these, or Human Resources issue, have you considered getting in contact with our Human Resources Team? Birkett Long Human Resources offers a unique service. Rather than a ‘one size fits all’ approach, our experts will design a package which truly meets the needs of your individual business. 

Reggie Lloyd
01206 217347
reggie.lloyd@birkettlong.co.uk