You have the right to deduct money from an employee’s pay if:
- the employment contract specifically allows it
- it’s been agreed by you and the employee in writing
- you’ve overpaid them by mistake
- it’s required by law - for example Income Tax or a court order
- they missed work to be on strike or take industrial action
For example, you can only deduct money for training costs from their final pay if it’s agreed in the contract or in writing.
If it’s not in the contract or in writing, talk to your employee and see if they agree they owe you money.
If they do agree, you should get in writing:
- the amount owed
- how it will be paid back
Make sure you’re still paying the minimum wage
Your deductions must not lower someone’s pay below the National Minimum Wage, unless the deduction is for:
- tax or National Insurance
- something they’ve done which their contract says they’re liable for, such as damage to a vehicle through reckless driving
- repayment of a loan or advance wages
- an overpayment you made by mistake
- buying shares, other securities or share options in the business
- accommodation you’re providing to them
- something they use - for example union subscriptions or pension contributions
Agree how the money is paid back
It’s best to talk to the person first and agree how the money will be paid back. For example, a deduction from wages or a bank transfer.
If needed, you can set up a payment plan to help your employee with their finances. This is especially useful if they owe a large amount or you didn’t realise you were making overpayments for a long time.
If they don’t agree to pay you back
You can deduct money from their pay if you have the right to claim it back. Speak to them and let them know you’re planning to do so.
You should explain why you have the right to deduct it from their pay. For example, you can show them that it’s included in the contract or that you have a written agreement with them that allows it.
You have the right to deduct money from an employee’s pay if you made a simple overpayment for a week or month. Speak to the person and let them know how you're going to claim it back.
You shouldn't automatically reclaim money if you’ve made overpayments for a long time and either:
- you can't agree a repayment plan
- the employee didn't know you were overpaying them and will struggle to pay you back
In these situations speak to an Acas adviser to discuss your options. The adviser will explain the risks and benefits of each. They cannot tell you what to do next or give legal advice.
They no longer work for you
Contact them and explain why you think they owe you money and how much. If they refuse to pay you back, you can get legal advice about making a court claim for the money.