Can I dock wages?

Over the past 12 months there have been a handful of my employees who are generally very good at their jobs, but who have been careless in a number of areas resulting in a financial loss for my company. It’s not a sackable offence, but I would like to ensure it doesn’t happen again. I was wondering whether I’m legally entitled to dock their wages when such mistakes occur?

A. Derek Kemp of Liquid HR writes

Clearly, any financial loss that results from what's perceived to be careless work will be hard to accept. Whether deductions from wages are practicable or the most appropriate response will depend upon various considerations.

According to the law, whatever the business or industry sector, an employer must not make a deduction from an employee's wages unless it's required or authorised as a result of statute or a relevant provision in the employee's contract. Or the employee has previously confirmed in writing their agreement to such a deduction.

An example of a common and typically uncontroversial deduction authorised by statute is national insurance. With regard to contractual provisions, workers in retail employment often have a relevant clause in their contract, or alternatively it can be agreed in writing by the employee in advance, to enable the employer to make deductions from wages on account of cash shortages or stock deficiencies. But there's nothing to prevent employers in other sectors from making similar arrangements relevant to their own circumstances.

Leaving aside statutory provisions, if there's no contractual or other prior written agreement that entitles the employer to make deductions from wages, then by implication this isn't an option as a disciplinary measure or a means to recover financial loss. In which case, seeking to amend existing employment contracts or otherwise reach agreement in writing to make deductions is one possibility. In so far as this would be a change that could only be to the detriment of employees suggests it might not be straightforward reaching agreement.

An alternative course would be to invoke the company's disciplinary procedure, starting with an investigation into the circumstances of the apparent carelessness by employees, and if appropriate leading to a hearing. At the same time, it should prove constructive to maintain an awareness of other aspects to a possible solution, such as training needs of employees, and/or tightening-up business processes.

If you are interested in employee salaries, you may also want to read about how much you should pay your staff.


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