Deductions from wages

Sick pay schemes set out an employee’s contractual right to be paid when absent from work due to sickness or injury. The law protects individuals from having unauthorised deductions made from their wages. Acas says one of three conditions has to be met for an employer to lawfully make deductions from wages or take payments from a worker (although there are exemptions, for example, an earlier overpayment of wages or expenses). The deduction or payment must be:

• required or authorised by legislation (for example, income tax or national insurance deductions);

• authorised by the worker’s contract — provided the worker has been given a written copy of the relevant terms or a written explanation of them before it is made; and

• consented to by the worker in writing before it is made.

However, the Deduction from Wages (Limitation) Regulations 2014, rushed through by the Conservative-led coalition government in December 2014, limits how far back employees can go in claiming compensation for any kind of deduction from wages. The legislative change was made in response to the EAT decision in Bear Scotland Ltd v Fulton and other cases about the exclusion of overtime from the calculation of holiday pay. It is not yet clear what implication, if any, this has for occupational sick pay claims.