Economic downturn results in unpaid wages

As reports this week confirmed that the UK economy shrank by 0.2 per cent in the last three months of 2011, economists have warned that if this figure does not show improvement in the first quarter of 2012, the UK will be plunged back into recession.

Royal Mail are rumored to owe their temporary Christmas sorting office staff wages

With belts tightened even further, many businesses are finding it a struggle to pay their employees wages on time, or even at all.

Royal Mail is a household name hitting the headlines. They are rumored to owe their temporary Christmas sorting office staff wages, which they have shrugged off as ‘disputed calculations’ not ‘unpaid wages’. They are one of many businesses who face an influx of employment tribunal claims for wages or even breach of contract (capped at £25,000 in the employment tribunal). Many temporary workers claim to have received letters from Royal Mail demanding money back due to alleged overpayments leaving them confused as to where they stand.

Both businesses and individuals should know what their rights and obligations are when it comes to wages.

The general position is that no deductions can be made to wages unless:

• permitted by law or in the contract

• consent obtained from the worker for the deduction

What is the definition of ‘deduction’?

“Where the total amount of any wages that are paid on any occasion by an employer to any worker employed by him is less than the total amount of wages properly payable on that occasion”.

Any deficiency in pay is defined in law as a ‘deduction’. If sums are deducted or not paid, there is a right to bring a claim in the employment tribunal for the shortfall.  Workers and individuals who are self employed are also entitled to protection from deductions from wages.

It is imperative that businesses keep accurate records of hours worked by staff and notify payroll departments accordingly so that staff are paid what they are legitimately due. Many businesses seem to be getting themselves into difficulty having employed temporary staff, changes to contracts and or changes to hours worked by staff which they have had to implement as cost saving measures. Failing to notify payroll after any changes can result in incorrect wages being paid, and consequently tribunal claims being lodged which are costly to defend.

What is the time limit for bringing a claim?

Employees have three months less one day from the date the last deduction is made/wages are paid. The tribunal can extend time if it considers that it was not reasonable for the individual to present the claim in time. Individual’s claiming unfair dismissal need to be mindful that the limitation date for any unlawful deductions from wages claim may differ to the unfair dismissal claim and are advised to seek legal advice.

What will the tribunal do?

The matter will be heard before an employment judge where both the individual and employer will have a chance to put forward their case. If the tribunal finds that the complaint is well founded, the judge will make a ‘declaration’ and will ‘order’ the employer to pay or repay the sums that are owed.

Whilst businesses may make errors in payment of wages in innocence, they should be mindful of the rights individuals have not to suffer deductions and the recourse available through the employment tribunal where the costs to defend a claim may run into thousands, often more than the wages even owed!

If you are business and/or individual requiring employment law advice, please do not hesitate to contact Miss Kaajal Nathwani of this office on 0208 363 4444 or alternatively via email on kaajal.nathwani@curwens.co.uk