Employee won’t work their notice - deduct from pay?
Lawful wage deductions
Employees (and workers) have a statutory right not to suffer unauthorised wage deductions. Where the total amount of wages you pay to an employee on any occasion is less than the amount that’s properly payable to them, the deficit is a wage deduction. The Employment Rights Act 1996 provides that one of three conditions must be met for you to lawfully make wage deductions:
- the deduction is required or authorised by legislation, e.g. income tax and NI
- the deduction is authorised by a provision of the employment contract, provided they’ve been given a copy of that contract or they’ve been notified in writing of the existence and effect of the provision before the deduction is made; or
- the employee has given their consent in writing in advance to the deduction being made.
“Wages” are any sums payable to the employee in connection with their employment and include bonuses, commission, holiday pay and statutory payments such as statutory maternity and sick pay.
Tip. Expenses payments are excluded from “wages” and so an employee has no statutory protection if deductions are made from those.
Refusal to work notice period
Where an employee is refusing to work all or part of their notice period, they’re not entitled to be paid their wages for that part of their notice period that they’re unwilling to work, so non-payment in those circumstances isn’t a wage deduction - the wages were never due to them in the first place.
Pre-estimate of loss. However, if you want to make a deduction from the outstanding wages that you do owe the employee to compensate you for the fact they’re acting in breach of contract in refusing to work their notice period, that is a wage deduction. As they’re not going to give their written consent to the deduction, there needs to be a relevant clause in their employment contract that clearly permits a wage deduction to be made in these specific circumstances. In addition, the clause must represent a genuine pre-estimate of the loss you’ll suffer due to the employee’s refusal to work their notice; it can’t be a penalty clause as those are unenforceable (see The next step ).
Tip. If you do have a clause that sets maximum deduction parameters, you should still only deduct a sum up to that maximum that represents the loss you’ve actually suffered as a result of the employee’s breach of contract, e.g. the difference between their wages and the costs of a contractor that you’ve hired to cover their work over the notice period. You can’t compensate yourself for inconvenience!
Unlawful wage deductions
If you make an unlawful wage deduction, the employee can submit an employment tribunal claim. If they’re successful, not only will you be ordered to repay the deduction but also you’ll lose your right to recover that sum by other means and you may be ordered to pay them compensation for any financial loss they’ve suffered that’s attributable to your deduction, such as bank charges.
For a failure to work notice period clause, visit https://www.tips-and-advice.co.uk , Download Zone, year 26, issue 8.
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