Deductions from Wages

What is a Wage

In a strict sense, wages are not synonymous with pay. So for purposes of clarification, let us make some specific definitions.

Wages are what your employer pays you for doing your job. Pay, on the other hand, refers to the basic amount you are entitled to which could be your hourly, daily or monthly rate.

What are the components of wages

Wages include all the compensation connected with your job such as bonuses, fees, commissions, overtime pay, holiday differentials, etc. Other payments such as Sick Pay or Maternity Pay likewise form part of this. Also included are items with fixed values which can be used as payment for goods and services or exchanged for cash. These can be items such as cash vouchers, gift certificates and the like.

Which items do not constitute a part of wages

On the other hand, some specific items do not form part of your wages. These include tips received in the course of your work. Loans and salary advances are also included in the items that do not form part of your wages. Pensions, lump sum payments for retirement are not part of wages either. And lastly, the reimbursement or payment for expenses incurred in the course of performing your job is also excluded. For example, the transportation expenses incurred by a salesman in the course of performing his duties cannot be considered part of his wages.

Deductions must be disclosed prior to then being made

All deductions must be disclosed by the employer beforehand. The reasons for the deductions must be clearly stated and within the parameters and guidelines issued by the government.

Workers are afforded a substantial amount of protection from unauthorised wage deductions through several rules and regulations. There are also specific guidelines to be followed when imposing deductions.

Government rules regarding deductions from wages

Under the law, only the following deductions are permitted:

  • deductions required by law. e.g. income tax, insurance and government loan payments

  • deductions that the employee has explicitly consented to in writing subject to certain conditions

  • deductions explicitly mentioned in the employee’s contract of employment and agreed to by the employee

  • deductions that come about as a result of the violation of any statutes and imposed through disciplinary¬†proceedings

  • deductions for any statutory payments that are to be made to a public authority

  • deductions incurred as a result of absence from work because of employee participation in strikes and other industrial actions

  • deductions which are for the purpose of recovering excess payments of wages or expenses

  • deductions that are ordered by a court or through an Employment Tribunal decision

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For more information on:

  • Deduction Agreements
  • Retail work: Extra Protection from Deductions
  • Example of Protection in a Retail Scenario
  • Procedure to Follow In The Event of Deductions