Unlawful deduction from wages

The most common employment tribunal claim nobody has heard of — and the one most often lost to a deadline, because the clock starts on the pay date.

When is a deduction from my wages lawful?

Only where it is required or authorised by statute — income tax and National Insurance, for example — or by a written term of the contract, or where the worker has given prior written consent to that particular deduction. Consent given after the money has been taken does not make an earlier deduction lawful.

Does not being paid at all count as a deduction?

Yes. Where the total wages paid on any occasion are less than the total properly payable, the shortfall is treated as a deduction. That is why non-payment of a final salary, of overtime that was properly earned, or of accrued holiday pay is brought as a deduction from wages claim.

What is the time limit?

Three months less one day from the date of the deduction, or from the last deduction in a series, extended by ACAS Early Conciliation. Because most people are paid monthly, the window closes far faster than people expect: the clock starts on the pay date, not on the day the dispute ends.

How far back can I claim?

For claims presented on or after 1 July 2015, the Deduction from Wages (Limitation) Regulations 2014 limit recovery to deductions made in the two years before the claim was presented. Within that two-year backstop, a series of deductions can still be linked, and in Agnew the Supreme Court held that a gap of more than three months does not automatically break a series.

Can my employer deduct for a till shortage or damage?

Only if a written contractual term or prior written agreement authorises it. Retail workers have an additional protection: on any pay day, a deduction for cash shortages or stock deficiencies is generally limited to a tenth of the gross wages payable on that occasion, though that cap does not apply to the final payment on leaving.

Does this cover bonuses and commission?

It covers sums properly payable as wages, which includes contractual bonuses and commission once entitlement has crystallised. A genuinely discretionary bonus that has never been declared is harder, because if nothing was properly payable there is nothing to deduct.

The rule, and why it is broader than it sounds

Section 13 of the Employment Rights Act 1996 says an employer must not make a deduction from a worker’s wages unless it is required or authorised by a statutory provision or a relevant provision of the worker’s contract, or the worker has previously signified in writing their agreement to it. Three points make this far wider in practice than the wording suggests.

First, the Act treats underpayment as deduction. Where the total wages paid on any occasion are less than the total properly payable on that occasion, the deficiency counts as a deduction. So a claim for unpaid final salary, for overtime that was worked and not paid, for a shift rate applied at the wrong level, or for accrued untaken holiday pay is a deduction from wages claim even though the employer never “deducted” anything.

Second, it applies to workers, not just employees. Anyone within the extended

definition can bring the claim, which makes it one of the main routes for agency and gig-economy claimants.

Third, there is no qualifying period of service. Unlike ordinary

, you do not need two years, or any particular length of

. A worker underpaid in week one can claim in week two.

What makes a deduction lawful

• Income tax, National Insurance, student loan repayments, and deductions under an
• A written contractual term.
• The term has to exist, be written, and have been notified to the worker before the deduction is made. A clause introduced in a revised handbook after the event does not retrospectively authorise it.
• Prior written consent.
• Signed before the deduction, and specific to it. A general statement in an induction pack that the employer may make deductions is weaker than a signed agreement identifying the particular sum.
• Specific exceptions.
• Including recovery of an earlier overpayment of wages or expenses, and deductions made because the worker took part in a strike or other industrial action. Overpayment recovery is a real exception, not a general licence — the amount and the basis still have to be right.

Retail work has an extra layer. Where a deduction is made from a retail worker on account of a cash shortage or stock deficiency, the amount deducted on any pay day is generally limited to a tenth of the gross wages payable on that occasion. That cap does not apply to the final payment when employment ends, which is where most disputes about till shortages actually arise.

The deadline is the whole game

A complaint must be presented to the tribunal within three months less one day beginning with the date of payment of the wages from which the deduction was made, or, where there was a series of deductions, from the last deduction in the series. That period is extended by

, which must be started before a claim can be presented.

The reason this deadline catches so many people is the mismatch between the legal clock and the human one. An employee raises a query about February’s pay, chases in March, is told it is with payroll in April, escalates through a grievance in May, and finally accepts nothing is coming in June. By then the deadline for the February deduction has gone. Time runs from the pay date, not from the moment hope runs out. Start early conciliation while you are still negotiating — it does not commit you to a claim, and it protects the position.

Where deductions repeat month after month, they may form a series, and time runs from the last one. The Supreme Court in

held that a gap of more than three months between deductions does not automatically break the series, which reopened claims that the earlier approach had cut off. But the two-year backstop still bites: for claims presented on or after 1 July 2015, recovery is limited to deductions made in the two years before presentation.

Notify ACAS first, then present an

. There is no fee to bring an employment tribunal claim. Set out the arithmetic clearly: for each pay period, what was properly payable, what was paid, and the difference. A short schedule with a total is worth more than several paragraphs of narrative, and it doubles as the beginning of your

Evidence is usually documentary and usually already in your possession: the contract or written statement of terms, payslips for the periods in dispute, rotas or timesheets showing hours worked, and any written agreement the employer relies on to justify the deduction. Ask for that written authorisation explicitly. Employers who cannot produce it frequently settle rather than defend.

One route to think about before committing: a claim for unpaid wages can sometimes be brought as a

claim in the county court instead, where the limitation period is six years rather than three months. The trade-offs are real — court fees, a costs risk that the tribunal does not carry — but where a tribunal deadline has already passed it may be the only route left.

A warehouse worker paid monthly has £120 taken from each of four consecutive payslips for “equipment damage”. No written term authorises it and she signed nothing. The last deduction was made in the pay run on 28 June.

Number of deductions

Deadline — before ACAS extension

Because the four deductions are for the same reason in consecutive pay runs, they form a series and time runs from the last of them. She notifies ACAS well before 27 September, which pauses the clock, and presents an ET1 setting out the four payslip dates and the £480 total. The employer’s defence stands or falls on producing a written term or a signed prior agreement.

ACAS Early Conciliation

Employment tribunal time limit

Employment Rights Act 1996, section 13

Employment Rights Act 1996, section 23

Chief Constable of the Police Service of Northern Ireland v Agnew [2023] UKSC 33

Unlawful Deduction from Wages — Employment Tribunal Glossary

When a deduction from pay is lawful, why underpayment counts as a deduction, how the three-month deadline and the two-year backstop work, and how to bring the claim.