PAY - 20.04.2023

Making lawful deductions from a retail worker’s wages

Retail employment

The provisions, in ss.17-22 Employment Rights Act 1996 (ERA) , cover workers in “retail employment” , i.e. employment (whether or not on a regular basis) involving “the carrying out by the worker of retail transactions directly with members of the public or with fellow workers or other individuals in their personal capacities” or “the collection by the worker of amounts payable in connection with retail transactions carried out by other persons” in such circumstances. A retail transaction is one for the sale or supply of goods or the supply of services, including financial services.

Pro advice. The provisions don’t cover those who only sell or supply goods or services to companies.

Pro advice. The provisions give extra protection for retail workers - any deductions must also comply with the general provisions in s.13 ERA - see yr.4, iss.14, pg.4 (see Follow up ).

Deductions from wages

The provisions give protection when deductions are made from a retail worker’s wages in respect of cash shortages or stock deficiencies, including where the deduction is made because of: (1) any dishonesty or other conduct by the worker which resulted in the shortage/deficiency; or (2) any other event in respect of which they have any contractual liability, and which so resulted. A cash shortage is “a deficit arising in relation to amounts received in connection with retail transactions” and a stock deficiency is one “arising in the course of retail transactions” . The provisions say that, when a deduction from wages is made, the amount (or aggregate amount) must not exceed 10% of the gross wages payable to the worker on a particular pay day.

Pro advice. You can deduct the full amount of the shortage/deficiency over several pay days, provided each deduction is no more than 10% of gross wages. The 10% limit also doesn’t apply to deductions from the “final instalment of wages” on employment termination.

Pro advice. You must make the deduction within twelve months of when you established the existence of the shortage/deficiency, or (if earlier) the date when you ought reasonably to have done so. However, where there’s a series of deductions resulting from a shortage/deficiency, only the first deduction in the series needs to have been made within the twelve-month period. Give the employee advance notice in writing of the deduction (see Follow up ).

Payments from retail workers

There’s also protection when you receive a payment from a retail worker on account of a shortage/deficiency. You can’t receive a payment unless you’ve: (1) notified the worker in writing of their total liability for that shortage/deficiency; and (2) made a written demand for payment on one of their pay days. That demand (or the first in a series) must be made: (1) no earlier than the first pay day on or after the date of written notification of total liability; and (2) within twelve months of when you established the existence of the shortage/deficiency, or (if earlier) the date when you ought reasonably to have done so.

Pro advice. The amount (or aggregate amount) demanded must not exceed 10% of the gross wages payable to the worker on any pay day (or the balance of 10% after subtracting deductions made for shortages/deficiencies), but the 10% limit doesn’t apply to payments received on or after the day on which their final instalment of wages is paid.

Previous article on deductions from a worker’s wages

Advance notice of cash shortages and stock deficiencies