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Deductions from pay


It is very tempting sometimes to try and recover sums owed by an employee from their final pay when they leave. This is one of the few areas where the law is very clear. Unless you have the written approval of the employee that you can deduct such sums from their final pay, it is unlawful to do so and a Tribunal will uphold any claim for unlawful deduction.

Having verbal approval is not sufficient and having a signed receipt for the sum given to the employee is not sufficient. The statement must clearly state for example 'I hereby authorise the Company to deduct the sum of x from my pay and to deduct any sums owing on my leaving the Company from any final sums owing to me'. Such a statement must then be signed and dated by the employee to be valid. Only then can you deduct from pay and final pay.

If you deduct without such authority you will lose any claim against you for unlawful deduction. But more important, you will then also lose the right to try and recover the amount by action brought in the county court. This was shown in the case of Potter v Hunt Contracts Ltd, in which it was confirmed that the amount unlawfully deducted reduces the sum recoverable by the employer. In this case the employer had unlawfully deducted 278.50 but was owed 523. By unlawfully deducting the first sum, they could only attempt to recover the sum of 244.50 at county court.

Therefore, if you want to recover sums from the county court, be sure that you have the correct authority to deduct other sums from final pay before doing so.

November 2001

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