Unlawful deduction of wages

Wages an employer takes off, or simply fails to pay, without a lawful basis under Part II of the Employment Rights Act 1996 — one of the more straightforward tribunal claims, with a claim deadline that recently doubled.

What counts as an unlawful deduction from wages?

Broadly, any deduction, or any underpayment treated as a deduction, that is not required or authorised by statute (such as tax and National Insurance), not provided for in the worker's contract with prior written notice of the specific term, and not separately agreed to in writing by the worker in advance. Simply not paying wages that are properly due — for example withholding a final month's pay, or unpaid overtime — is also treated as a deduction under Part II of the Employment Rights Act 1996.

Can my employer deduct money for a till shortage or stock loss?

Only within strict limits for workers in retail employment. Section 18 of the Employment Rights Act 1996 caps a deduction for cash shortages or stock deficiencies at one-tenth of the worker's gross wages on the pay day in question, and the deduction must generally be made within twelve months of the employer discovering, or reasonably being expected to have discovered, the shortage.

What is the time limit for bringing an unlawful deduction claim?

Since 1 October 2026, the general deadline is six months from the date of the deduction, or the last in a series of deductions — extended from the previous three months by the Employment Rights Act 2025. The six-month deadline applies where that date falls on or after 1 October 2026; a deduction made before that date is still subject to the earlier three-month deadline. A tribunal can allow a late claim where it was not reasonably practicable to bring it in time.

What can the employment tribunal order if it finds an unlawful deduction?

Under section 24 of the Employment Rights Act 1996, the tribunal can order the employer to pay the worker the amount found to have been unlawfully deducted (or the wages properly due but unpaid). It is generally a straightforward repayment order rather than an award of additional compensation on top, though separate remedies may be available if the same facts also amount to another type of claim.

Is recovering an overpayment from a previous pay period always unlawful?

No. Recovering a genuine overpayment of wages or expenses is one of the specific exceptions in section 14 of the Employment Rights Act 1996, so an employer correcting a previous payroll error is not automatically making an unlawful deduction, even without the worker's separate agreement. Disputes often arise instead over how much was actually overpaid, or how quickly the employer is entitled to recover it.

Should I bring an unlawful deduction claim or a breach of contract claim?

It depends on what happened. An unlawful deduction claim under Part II of the Employment Rights Act 1996 is generally the more direct route for unpaid or short-paid wages, while a breach of contract claim may be more appropriate for other unpaid contractual sums, such as notice pay in some circumstances. The two routes can overlap, and it is worth checking which fits the specific facts rather than assuming either applies automatically.

What section 13 actually prohibits

Section 13 of the Employment Rights Act 1996 sets a simple default: an employer must not deduct from a worker's wages, or receive a payment from a worker, unless the deduction is required or authorised by statute (tax and National Insurance being the obvious examples), is authorised by a term of the worker's contract that the worker had been notified of in writing before the deduction, or is something the worker has separately agreed to or consented to in writing in advance. Section 13 also treats a shortfall between what was properly due and what was actually paid as a deduction in its own right — an employer does not avoid the rule simply by never paying the full amount in the first place, rather than paying it and then taking money back.

Section 14 carves out some specific exceptions that are not treated as deductions at all, including recovering a genuine overpayment of wages or expenses, deductions required following statutory disciplinary proceedings in specified sectors, and deductions agreed as part of a strike or other industrial action. These exceptions are narrow and fact-specific, so an employer relying on one should be able to point to the particular statutory basis for it.

The extra protection for retail workers

• 1 10% cap per pay day. Section 18 limits a deduction for a cash shortage or stock deficiency to one-tenth of the worker's gross wages payable on the pay day in question, whatever the size of the shortfall itself.
• 2 12-month limit to act. The deduction generally must be made within twelve months of the employer discovering, or reasonably being expected to have discovered, the shortage or deficiency.
• 3 Written notification still required. The general section 13 requirement for a written, notified contractual term or prior written consent still applies underneath the section 18 cap — the cap limits how much can be taken, it does not by itself authorise the deduction.

Bringing a claim, and what changed on 1 October 2026

A worker who believes they have suffered an unlawful deduction can complain to the employment tribunal under section 23. If the tribunal finds the complaint well founded, section 24 lets it order the employer to pay the amount that was unlawfully deducted or improperly withheld — essentially putting the worker back in the position they should have been in, rather than awarding additional compensation on top.

The deadline for bringing that complaint changed significantly on 1 October 2026. The Employment Rights Act 2025 doubled the general tribunal time limit from three months to six months, and section 23 was amended accordingly. The extended six-month deadline applies where the deduction complained of — or the last in a series of deductions — falls on or after 1 October 2026; a deduction that occurred before that date is still governed by the previous three-month deadline. A tribunal retains discretion to allow a late claim where it was not reasonably practicable to bring it within the applicable period.

A retail worker's till is found £40 short at the end of a shift in November 2026. The worker's contract contains a written term, notified in advance, allowing the employer to recover cash shortages from wages. The worker's gross wages for the next pay day are £280.

Gross wages on the relevant pay day

10% cap under section 18

Maximum lawful deduction this pay day

£28, not the full £40

Because the worker is in retail employment, the section 18 cap limits the deduction to one-tenth of gross wages for that pay day, even though a valid contractual term exists and the full £40 shortage has not been disputed. The employer can recover the remaining £12 from a later pay day, still subject to the same 10% cap and the 12-month time limit to act.

Statutory Sick Pay (SSP)

Employment tribunal time limit

Written statement of particulars

Employment Rights Act 1996, section 13

Employment Rights Act 1996, section 18

Employment Rights Act 1996, section 23

Unlawful Deduction of Wages — Employment Tribunal Glossary

What counts as an unlawful deduction from wages, the special rules for retail cash shortages, and the 2026 change to the tribunal claim deadline.