Payment of Wages

Employment legislation does not require an employer to pay wages at any particular time or form, whether in cash, cheque, or credit transfer. Formerly, legislation required payment in cash. However, there are payments in respect of unauthorized deductions. These apply not just to employees but also to persons under contracts of apprenticeship, Crown officers, and persons working onboard ships.

Deductions may be lawful provided the following conditions are complied with:

1. Required or authorized by legislation.
2. Authorized by the contract of employment.
3. Agreed in writing in advance.

The above conditions do not apply where the payments involve the recovery of earlier overpayments or expenses, result from disciplinary proceedings provided for in legislation, such as a statutory scheme, or as a consequence of taking part in a strike or industrial action, or to satisfy a court order.

Where deductions are made under an arrangement agreed upon by the employee in writing for payments to a third party, they are lawful.

The principal statutory deductions are PAYE and national insurance, with specific provisions for persons in the retail sector.

The provision applies to deductions due to cash or stock shortages, including non-payment of bonuses to which the employee is entitled. If there is no loss of stock or cash, deductions or payments because of dishonesty or conduct that results in the shortage or deficiency.

It is unlawful for an employer to deduct more than 10% from the gross amount of wages to a retail employee. If the deduction is made because of shortages and deficiencies, the limit does not apply to deductions from the final payment of wages upon termination of employment.

No deduction is permissible after 12 months from the date the shortage or deficiency has been identified, unless it is part of a series resulting from a particular shortage or deficiency, or the first deduction was made less than 12 months after the shortage or deficiency was or ought to have been established.

There are conditions applicable to deductions. The employer must, before receiving the first payment for shortage or deficiency, inform the employee in writing of the amount owed. If the employer must make a demand for payment relating to a particular shortage or deficiency, it must be provided on the first payday after the date on which the employer informs the employee of the full amount owed. The payment demanded on the payday added to previous deductions made because of shortages must demand no more than 10% of the gross salary on that payday.

Complaints about unlawful deductions may be made to an industrial tribunal, and this applies regardless of the period of employment.

Wages include fees, bonuses, commissions, holiday pay, statutory payments, luncheon vouchers, and gift tokens that can be converted into money. However, wages do not include loans, advances of wages, payments of expenses, redundancy payments, pension payments, lump-sum compensations, payment in kind, tips, and gratuities.

An employee who is not provided with work during a day when they are normally required to work under their contract of employment is entitled to a guarantee payment. This applies when there is a reduction in the requirements of the employer’s business for work of the kind the employee is employed to do or any other occurrence affecting the normal working of the business related to this type of work.

The entitlement is subject to the following provisions:

• Guarantee payments may only be made in respect of a complete working day lost. It does not apply to days on which some work is provided, even if it is outside normal working hours.
• The employee must comply with reasonable requirements imposed by the employer to ensure their services are available.
• An employer must not unreasonably refuse an offer from an employer of suitable alternative work.
• The employee is not entitled to a guarantee payment if the failure to provide work results from a strike, lockout, or industrial action involving any other employee of the employer or an associated employer.

The provision applies only to employees who have been in continuous employment for at least a month before the day on which a guarantee payment would otherwise arise. This does not apply to an employee who has no normal working hours prescribed in the contract of employment, Masters, and crew members in share fishing.

There is a limit of five days in any period of three months for the statutory entitlement to a guarantee payment.

Entitlement to a guarantee payment on a layoff day is determined by reference to the number of days of guarantee pay that have been allowed in the preceding three months. If the employee has received fewer than five days of guarantee payment in that period or payment is due, and the days of layoff are not consecutive, the three-month period is calculated separately for each day.

Where the number of days worked varies from week to week, the average number of days worked over the preceding 12 weeks is determined.

The amount of guarantee payment for a day is calculated by multiplying the normal working hours for the day by the guaranteed hourly rate. This is subject to an upper limit that varies with the retail price index.

The guaranteed hourly rate is the amount of one week’s pay divided by the number of normal working hours, which is taken from the employer’s contract or employment particulars.

Payments made under the contract of employment as a result of a collective agreement and guarantee pay are offset. If the contractual guarantee pay for a workless period is not directly related to a particular day, the proportion of contractual guarantee payment shall be allocated to each day based on the proportion of the day’s contribution to the workless period.

The statutory provisions for guarantee pay do not apply where exemption is made by parties to the agreement or the Agricultural Wages Board for Northern Ireland, or if the appropriate department is satisfied that relevant statutory provisions should not apply in light of their agreement, provided that the agreement provides a complaint procedure that includes a right of independent arbitration in the event of deadlock.

In effect, the agreement must contain guarantee pay provisions that are at least as favorable overall to the employees as the relevant statutory provisions.

There is a statutory right to receive a detailed, itemized pay statement at or before the time of payment. This provision applies to employees.

The itemized pay statement must contain the following:

• Gross amount of wages or salary.
• Amounts of fixed deductions and purposes for which they are made.
• Total figure for fixed deductions.
• Amount of variable deductions.
• Net amount of wages or salary.
• Amount of each part payment when different parts of the net amount are paid in different ways (e.g., cash/bank transfer).

An employer may give either a pay statement that specifies the amounts or purpose of each fixed deduction separately or pay statements that specify only the aggregate amount of all fixed deductions without explanation. In the latter case, the employer must give the employee a standing statement of fixed deductions at or before the time the pay statement is issued.

The standing statement of fixed deductions must be in writing, state for each item deducted the amount enforced and purpose and description of deductions. It must be given to the employee at or before the time of issuing the pay statement and must be reissued at intervals no longer than 12 months.

If there is a change that affects an employee’s fixed deductions, the employer must give the employee either a written notification of the details of the change or an amended standing statement of fixed deductions.