This question comes after a recent news story reporting that Costa Coffee employees at multiple stores claim they have had costs of £200 deducted from their pay for training, as well as other deductions. This poses an interesting question on when employers are able to make such deductions.
- The law on Employers deductions from wages
Section 13 of the Employment Rights Act 1996 (‘ERA 1996’), provides that it is unlawful for an employer to make a deduction unless:
- The deduction is required or authorised by statute or a provision in the workers contract; or
- The worker has given their prior written consent to the deduction.
Required or authorised by statute would include deductions such as for income tax and national insurance contributions.
Section 13(2) ERA provides that a ‘relevant provision’, means one that has been set out in a written contract which has been given to the worker before the deduction was made, or an express or implied term, that the employee has been made aware of in writing.
Finally, if relying on prior written consent from the employee, this must be given before the event giving rise to the deduction, not before the deduction itself.
Should an employer make a deduction that is not required or authorised under statute or the contract and the worker has not given prior written consent, the deduction may be unlawful. In this event, an employee may make a claim for unpaid or underpaid wages in the employment tribunal, whilst still working for their employer. This protection is conferred to all workers, not just employees and there is no qualifying period of service required in order to bring a claim. A claim must however be brought within three months of the deduction.
- Can employers deduct your pay for training?
If the employer is relying on a contract provision or written consent from the employee, the answer is Yes. If the deduction for training occurred without such authority, then the deduction would be illegal and the employee may have a potential employment claim.
In the above case, Costa Coffee has since confirmed that it makes deductions for training clear in employee contracts, if this is the case and provided this has been set out clearly, the deductions of £200 may be lawful. There are however further vital considerations around deductions for training that Employers should be aware of.
Employers should be ensuring the amount they deduct is the correct amount for the cost of the training. This can pose difficult for certain types of training, such as on the job training where the cost to the employer cannot be expressed in a clear amount. If an employer deducts an amount that does not resemble the actual cost to them, the clause permitting the deduction could be considered a ‘penalty clause’.
A penalty clause is a provision in a contract which provides for a sanction to be imposed on a party to the contract where that sanction is not a genuine pre-estimate of the loss suffered by the other party and is unenforceable in English law.
Further, employers must not deduct employees pay below the national minimum wage rate.
It is also important to make sure the clause is proportionate and does not impose an obligation to repay training costs that has the effect of discouraging an employee to leave, as this could amount to a restraint on trade.
- Key issues for employers
It is vital that employers ensure that it has written consent to make appropriate deductions before attempting to do so, or that it can rely on an appropriate provision in the employee’s contract. Employers seeking to rely on a repayment clause should also require employees to sign a separate written consent form detailing the specific deduction and making clear when the amount will be deducted, to avoid any uncertainties from employees.