Q&As

Can an employee bring an unlawful deduction of wages claim where the employer purports to make a deduction from an employee's pay for (a) tax or National Insurance contributions or (b) employee pension contributions, but the employer deducts more than is required or does not pass the amount deducted on to HMRC or the pension provider as required?

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Published on LexisPSL on 05/12/2019

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

  • Can an employee bring an unlawful deduction of wages claim where the employer purports to make a deduction from an employee's pay for (a) tax or National Insurance contributions or (b) employee pension contributions, but the employer deducts more than is required or does not pass the amount deducted on to HMRC or the pension provider as required?
  • Deductions for tax and national insurance contributions
  • Deductions for employee pension contributions

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:

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

    2. 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

  2. the worker has previously signified in writing his agreement or consent to the deduction (eg in respect of pension contributions)

Separately, ERA 1996, s 14 sets out certain ‘excepted deductions’ to which ERA 1996, s 13 does not apply (ie where there is no requirement for statutory or contractual authorisation, or the employee’s consent).

See Practice Note: Deductions from wages.

Deductions for tax and national insurance contributions

An employer is obliged to make PAYE deductions for income tax and national insurance contributions (NICs) from an emplo

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