Q&As

Are there any restrictions on a Tier 2 sponsor making a loan to a Tier 2 migrant and deducting loan repayments from their salary? Would this have to be reported?

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Published on LexisPSL on 28/01/2020

The following Immigration Q&A provides comprehensive and up to date legal information covering:

  • Are there any restrictions on a Tier 2 sponsor making a loan to a Tier 2 migrant and deducting loan repayments from their salary? Would this have to be reported?

In relation to the first part of this question, under section 13 of the Employment Rights Act 1996 (ERA 1996), an employer cannot make any deductions from the wages of a worker unless:

  1. the deduction is required or authorised to be made by virtue of

  2. a statutory provision, eg the requirement to make deductions for income tax or National Insurance contributions via Pay As You Earn (PAYE), or

  3. a relevant provision of the worker's contract, eg where the employer provides a loan to the worker and has a contractual right to take money out of the worker's wages in repayment, or

  4. the worker has previously signified in writing their agreement or consent to the deduction

In relation to a deduction to which the worker has previously signified in writing their agreement or consent, the requirement will be strictly construed. For example, if a loan agreement states that the employee will be required to repay any balance of the loan that is outstanding on the date of termination of employment, that does not give the employer the right to make a deduction from the employee’s final wages. To fulfil the condition that the employee should have previously signified in writing their agreement or consent to the making of a deduction, there must be a document which clearly states:

  1. that the deduction is to be made from

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