Unlawful deduction from wages: when your employer cannot take your pay

Your employer cannot simply decide to pay you less than you are owed. Under Part II of the Employment Rights Act 1996, any deduction from your wages is unlawful unless it falls into one of a few permitted categories. That covers outright deductions, underpayments and pay that is not paid at all.

What counts as "wages"

Wages is a broad term. It includes:

• Basic salary or hourly pay
• Overtime, commission and contractual bonuses
• Holiday pay, including the holiday element of final pay
• Statutory sick pay, maternity, paternity and shared parental pay
• Notice pay where you work your notice

Underpayment counts as a deduction. If you were owed £2,000 and paid £1,700, that is a £300 deduction, whatever your employer calls it.

When a deduction is lawful

A deduction is allowed only if:

• The law requires it, such as income tax, National Insurance, student loan or a court-ordered attachment of earnings
• Your contract allows it, and you were given the written term before the deduction happened
• You agreed in writing before the event that led to the deduction (agreeing afterwards does not count)

There are also narrow exceptions, including recovering a genuine overpayment of wages and deductions for taking part in strike action.

Retail workers have extra protection: deductions for cash shortages or stock deficiencies are capped at 10% of gross pay on any payday, except for the final pay when you leave.

Common unlawful deductions

• Holiday pay calculated on basic pay only, ignoring regular overtime or commission. See holiday pay entitlement.
• Final pay missing accrued holiday or with unexplained deductions. See holiday pay when leaving.
• Training cost clawbacks with no written agreement signed in advance
• Uniform or equipment charges that take you below the National Minimum Wage
• Pay withheld while suspended where your contract does not allow unpaid suspension. See suspended from work.
• Unpaid sick pay when you met the conditions for statutory sick pay

Time limits: act fast

A claim goes to the employment tribunal. The time limit runs from the date of the deduction or, for a series of deductions, from the last one in the series.

• For deductions on or after 1 October 2026, the limit is six months, following the Employment Rights Act 2025.
• For earlier deductions, the old limit of three months less one day may still apply, so do not assume you have longer.
• You must start ACAS early conciliation before you can file a claim, which pauses the clock.

The two-year backstop. For most wage claims you can only recover deductions going back two years from the date you make your claim, even where there is a long series. ACAS guidance confirms this. So if your overtime has been missing from holiday pay for five years, you can usually only claim the last two.

Worked example

Sam works in a warehouse, earning £13 an hour plus about £120 a week in regular overtime. For the last 18 months, the employer has paid his holiday at basic rate only. Across 4 weeks of leave a year at the normal-pay rate, that is around £480 a year short, and roughly £720 over 18 months. Because the underpayments are linked and recent, Sam can claim the full series.

How to recover your money

1. Check your payslips and identify exactly what was deducted and when.

2. Raise it in writing, asking the employer to explain the legal basis or repay. Use a formal grievance if needed.

3. Contact ACAS for early conciliation; many wage disputes settle at this stage.

4. Bring a tribunal claim if not. If you win, the tribunal orders the employer to repay the amount wrongly deducted, and can award extra for financial losses caused.

You are also protected from being punished for asserting this right. Dismissing an employee for raising a genuine wage claim can be automatically unfair; see our guide to unfair dismissal.

Get advice on a wages claim

Small deductions can hide a larger pattern, and the time limits are strict. Match My Solicitor connects you with employment solicitors who handle pay disputes. Tell us what happened and we will match you with a specialist at no cost.