Wage Deductions in Northern Ireland – Which Are Lawful and Which Are Unlawful?

Last updated: September 27th, 2023

Article 45 of the Employment Rights (NI) Order 1996 prohibits all deductions from an employee’s wages unless:

  • The deduction is required by statute or contractual provision; and
  • The employee has given his prior written consent to the deduction

A deduction in wages occurs where the sum paid to an employee falls below the sum properly payable to that employee. Also, if an employee is not paid at the specified time, a deduction of wages has occurred.

Wages have been defined by Article 59 of the 1996 Order to include:

  • Basic salary
  • Fees, bonuses, commissions, holiday pay
  • Stamps, vouchers and other exchangeable documents with a set monetary value
  • Statutory pay such as sick pay and maternity/paternity pay
  • Statutory holiday pay
  • Payment under a Protective Award (Article 217 of the 1996 Order)
  • Payment due under a reinstatement/re-engagement Order

The following payments are exempt from the statutory definition and therefore unprotected by Article 45 of the 1996 Order:

  • All other benefits in kind
  • Expenses
  • Pension and gratuity payments on retirement
  • Redundancy payments
  • Payments made outside the employment relationship

In the retail industry, certain lawful deductions can be made from employees in the event of cash shortages or stock deficiencies. Deductions cannot exceed 1/10 of the employee’s gross pay and must be made within 12 months of discovering the shortage or deficiency.

However, there are certain circumstances in which lawful deductions can be made from an employee’s pay. These are:

1)        Contractual Deductions

For an employer to make a provision for contractual deductions from wages, an express clause to that effect is required in the employment contract.

However, the clause must be reasonable if it is to stand up to legal scrutiny. Common examples include:

  • Unauthorised absences
  • Where the employer has the right to suspend the employee without pay
  • Overpayment of wages to the employee. This is only possible where the overpayment stemmed from a mistake in fact (computing error), not a mistake in law (employer did not realise he didn’t have to legally pay his employee for an absence).
    The employer can be stopped from reclaiming an overpayment if: the employer made representations which persuaded the employee he was entitled to the money; the employee acted in good faith, and the overpayment was not primarily the fault of the employee
  • Withholding of goodwill
  • Losses caused by the employee’s negligence or breach of duties
  • To reclaim loans paid to the employee by their employer
  • To reclaim any amount owed by the employee from their final wage (such as overpaid holiday pay)

2)        Refusal to Work

Where an employee has refused to perform all or part of their contractual duties, an employer is entitled to make deductions from their wages.

The sum deducted must be proportional to the time an employee refused to perform. If the employer has previously stated expressly that part-performance of duties is not acceptable, that employer is entitled to withhold the employee’s entire wage for the relevant period.

3)        Statutory Deductions

In certain circumstances, an employer can be legally required to make deductions from an employee’s wages.

The most important deductions include:

  • Payment of income tax under the PAYE system
  • Payment of National Insurance Contributions (NIC)
  • Where an Attachment of Earnings Order had been made by the Court
  • Repayment of student loans
  • Trade union subscriptions if an agreement to such effect is made between the employer and the relevant trade union
  • Deductions made as part of an agreed occupational contributory pension scheme

Article 55 of the 1996 Order empowers an employee to bring a claim for unauthorised deductions to an industrial tribunal. Such a claim must be brought within three months of the deduction.

If the tribunal finds in favour of the claimant, it makes a declaration to that effect and can make an Order for reimbursement to the employee. This will amount to the difference between what the employee was paid and what they should have been paid.

Any repayment made to an employee cannot be lawfully deducted by the employer at a later stage. In this situation, the employer’s only option is to pursue a common law action against the employee in the County Court.

If you have any questions regarding deduction of wages, please contact the advice line on +44 (0)28 9032 5495

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