Unlawful Deduction from Salary

Unlawful Deduction from Salary

I have recently heard a grievance regarding a claim of unfair deduction of salary. The background is an employee who recently claimed that he had been underpaid by 1 hour per week since 2000. He had changed his hours to par time at that time. There was nothing in writing to confirm his new hours of work. After some discussions the company agreed to pay an amount of money to him equivalent of the unpaid hours less an amount equivalent to a payment made to him during a period of sickness absence, which was over and above his contractual entitlement. He is now making the claim that the deduction made would be equivalent to an unlawful deduction from salary. Any thoughts would be appreciated. For information the employee is now retired.
Karen Scott


If you mean by 'claim' that he is making a tribunal claim, he has to do so within 3 months of the last unlawful deduction. However, if the payment was made to him within the last three months, then he may be able to open the claim.

When the employer made the payment, was anything put in writing to describe the basis of the payout? It would appear that by making the payment the company has accepted that he had been underpaid for the 1 hr per week unless they clearly stated that it was an ex gratia payment.

If they did not specify this, then clearly they would in a tribunal be seen as having accepted his underpayment claim and therefore would be required to pay up for the period of absence.

You now have to look at what his sickness entitlement would be based on the acceptance of his new hours of work. If the company payment was less than his entitlement,he has a point. If as you suggest, it was over and above his contractual entitlement at his new hours then he needs an explanation a rejection of his claim.

Hope this helps. If you need any further help, feel free to contact me through my profile.

Seems perfectly straight forward to me. The company offers to pay him the hours owed, and does so, but less what he was overpaid when he was off sick.

...or is it..?

One thing maybe worth mentioning as it could be the underlying reason for the claim; under ERA 1996, an unlawful deduction or otherwise can be defined from whether the employer made the employee aware of the overpayment and informed him that it was going to be deducted, and to this end, whether the employee would have reasonably expected the overpayment in the first place. Too many employers end up out of pocket in these cases simply because they failed to communicate to the employee their intentions to recover any overpayments, regardless of whether there was an entitlement to the monies or not.

sjbeale's picture

By making good the situation and so long as you have written documentation to prove this, if he makes a tribunal claim you have a good defence.

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