Wage deductions: what employers can and cannot do

There are circumstances where an employer may need to consider making deductions from employee's salary—for instance, when training fees or a bonus payment need to be recovered from a departing employee, clinical equipment has been damaged, an employee has breached a contractual obligation, or a loan has not been repaid. The employer wants to recover the loss from the employee; but can they just delve into the employee's pay packet and take what they want? The answer surprises many employers.

Employees are generally entitled to receive a regular payment of wages in the amount set out in the contract of employment. However, there are situations in which an employer may need to withhold an employee's wages, or temporarily reduce the sum paid.

The definition of ‘wages’ is any sum payable to the employee in connection with their employment. This will include non-contractual bonuses, commission and statutory sick pay. Pension contributions, expenses and a loan to an employee are not considered wages—although a failure to provide these benefits when contractually obliged to may lead to the employee bringing a breach of contract claim.