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Payment and Wages

Identifying pitfalls and troubleshooting common mistakes

Paying employees for work done is one of the core duties of any employment relationship. Mistakes can cost more than just money, with mutual trust and confidence and business reputation at stake

Quite rightly, employees and workers will usually expect to be paid for the work they have done and to be paid at a level at or about the applicable National Minimum Wage (NMW) for the employee’s age and year in question. Most scrupulous employers oblige without issue but accounting errors and mistakes can creep in and when they do it is important that swift, corrective action is taken.

Most contracts of employment will include provisions which relate to when and how an employee will receive payment for the services they have provided to their employer. In fact, employers are required under section 1 of the Employment Rights Act 1996 (“ERA”) to confirm this information to employees at the outset of their employment. Beyond the employment contract, sections 13 to 27 of ERA further make it unlawful for employers to make deductions from a worker’s wages unless certain exceptions apply. These exceptions are limited and narrow to prevent unscrupulous employers from cheating their staff out of wages. They also protect the employer in circumstances where owing to an accounting error an employee is overpaid.

It is permissible for an employee to consent to deductions being made from their wages. Think season ticket loans which are commonly repaid by monthly deductions from wages.

However wages and deductions are documented it is important for employers to pay their employees correctly as pay is central to an employment contract and infringements will likely not be taken lightly by an aggrieved employee, unable to pay his or her bills on time. In the worst cases, repeated or serious failure to pay wages could amount to a fundamental breach of contract and lead to constructive unfair dismissal claims (see our section on Employment Claims).

Failure to pay employees in accordance with National Minimum Wage requirements not only results in claims by employees but also potential fines and naming and shaming on the Government website for failing to comply with NMW obligations – and yes, interns must be paid at least NMW!

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