Shop employers making deductions from worker’s pay due to cash shortages

In certain circumstances it is lawful for an employer to make a deduction, on account of cash shortages or stock deficiencies, from a retail worker’s wages. The Employment Rights Act 1996, however, gives protection to retail workers in relation the circumstances under which a deduction can be made and as to what can be deducted from the wages of such workers.

What are the worker’s rights?

In what circumstances can a deduction be made?

An employer can only make a deduction from wages if there is a provision in the worker’s contract of employment authorising the deduction or where the worker has consented to the deduction in writing or where there is specific legislation which authorises such a deduction.  

Where a worker’s contract of employment makes provision for a deduction in wages no deduction can be made in respect of shortages or deficiencies arising prior to the date of the contract. Similarly, where a worker has consented to the deduction in wages no deduction can be made in respect of shortages or deficiencies arising prior to the date upon which they gave their written consent.

How much can be deducted?

Where an employer is entitled to make a deduction on account of cash shortages or stock deficiencies the amount of the deduction, or the aggregate amount of the deductions where more than one deduction is made, cannot exceed one-tenth of the gross wages due to the retail worker on a particular pay day.

How long does an employer have to make a deduction?

The employer has twelve months in which to make a deduction. The twelve months commences on the date upon which the employer became aware of the shortage or deficiency, or the date upon which he ought reasonably to have established the existence of the shortage or deficiency. Any deduction made after the twelve month period is treated as an unlawful deduction.

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For more information on:

  • What can a retail worker do if an unlawful deduction has been made?
  • How long does a retail worker have to make such a complaint?
  • What powers does an industrial tribunal have?