Under the Employment Rights Act 1996, employers have a legal obligation to pay their employees’ full wages on the agreed date outlined the employment contract. Failing to do so can cause mistrust, negatively impact morale, and hamper productivity. Furthermore, there may be legal consequences. Missing payment just once is deemed as an unlawful deduction of wages and a breach of contract. HM Revenue and Customs (HMRC) may investigate complaints, and if they find employers have underpaid, or not paid the National Minimum Wage, they can issue a notice for arrears. This date back to up to six years and fines could reach £20,000 for each worker. Employees may also make a claim to an employment tribunal, which could result in employers being ordered to pay the owed wages, and any compensation for associated financial losses.
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Wages not paid on time
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Pay & benefits are what your employees receive for the work they do for your company.
The following are mandatory benefits employees must receive, retirement pay, holiday pay, maternity/paternity pay, and sick pay, as well as their salary.
There are other types of benefits you can give your employees, such as bonus schemes, company cars, employee expenses, and share schemes.
Peninsula can offer you expert advice on pay & benefits, ensuring you pay your staff correctly and avoid claims being raised against you.
Yes, if you don't pay your staff their legal entitlements claims can be raised against you. This could lead to financial damages being paid,
Pay inequality has been a prominent, ongoing issue in the UK economy for years. Not only through gender, but the government has recently found disparities within ethnic and disability demographics.
When it comes to paying staff, employers must ensure the right amounts are given – especially for those not on full-time contracts. Pro rata ensures these employees are compensated correctly; and that includes wages, holidays, and benefits.
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There may come a time when you’re unable to pay staff wages.
If this happens, you might be wondering about the potential legal action you could face. And all the requirements you need to meet.
Following the correct procedures for late or missed wages is pivotal for your business. Not just for your reputation but for the welfare of your staff. Having a clear method will help eliminate questions like, can I sue my employer for not paying me?
In this guide, we explain the rules for employers paying wages late in the UK. And what to do if you can’t pay your staff. Peninsula offers expert advice on ensuring you pay your staff correctly, contact us today and see how we can help.
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In UK law, all employees have the right to receive payment for work they provided. Employers have a responsibility to pay their staff on time. So, it can be considered illegal to pay wages late.
Some of the most common types of wages can include:
Sometimes, employment contracts include a payment date clause. So, an employer not paying on time can be classed as a . And these wage claims can prove costly.
Legal action against employers not paying salaries can sometimes lead to financial penalties. And compensation can go up to £25,000 for employees who are not being paid on time in the UK.
The Employment Rights Act 1996 (ERA) states withholding wages is illegal. And pay laws in the UK don’t differentiate between one-off payments or frequently late payment.
If you miss payments, like pensions, expenses, and benefits, it’s only considered a legal breach if a court resolves it as one. ACAS unpaid wages states how and where to report unpaid wages.
If an employee thinks they have not been paid their legal wage, they can raise their case to HMRC who will provide legal advice.
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You should let staff know about any delays to wages as soon as possible.
You need to determine if being unable to pay wages is a short-term issue, or part of a larger financial problem. And give them information on when to expect their pay.
Staff likely won’t stay for long if they’re frequently not getting paid for work done.
And without them, productivity and success are less likely – forcing or business closure.
When can you withhold pay?
There are limited times when it’s legal for you to withhold pay from staff. In most cases, it must be stated in the employment contract.
Can an employer withhold pay if you quit without notice?
You must provide your staff with the wages they have earnt. And doing so can lead to employees raising claims at employment tribunals for unpaid wages.
Can an employer withhold pay after termination?
If an employee’s contract is terminated, you no longer have a contractual right to remove any money from their wages.
Any attempt to withhold pay could lead to claims of unlawful deduction of wages.
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You shouldn’t make deductions to wages unless stated in their contract and have been previously agreed to.
It isn’t considered good business practice to refuse to pay your employees for mistakes. Or punish them through salary deductions. They could decide not to work with an employer who doesn’t pay legal wages.
Instead, follow through with your disciplinary procedure. And investigate the extent of their mistake and how much your business with be affected.
Reclaiming money from employees
In some cases, you might find you’ve . When an employee owes an employer money, it could be because of several reasons. But you have right to deduct it if:
The employment contract allows it.
The decision has been previously agreed to.
It’s a legal requirement, like income tax or a court order.
Work was unfulfilled due to taking part in a strike or industrial action.
The last thing an employee needs is to not be paid correctly by their employer. It’s a good idea to make a payment plan to recover money owed by employers.
The plan should be created with the employee’s agreement. And it’s not advised to simply deduct the payment, just because they didn’t agree with the terms.
FAQs. Wages not paid on time
Is it illegal to pay wages late in the UK?
Failing to pay wages in full on an agreed date outlined in an employment contract is an unlawful deduction of wages, which under the Employment Rights Act 1996 is breach of the employment contract.
What kind of payments count as wages?
So long as they’re contractually owed, wages include regular salary, overtime, bonuses, commission, holiday pay, Statutory Sick Pay (SSP), and notice pay.
What are the possible penalties for an employer who pays wages late?
If late payment results in an employee being paid below the National Minimum Wage, HRMC can issue fines of up to £20,000 per worker. Also, the employee can make a claim to an employment tribunal. Either of these penalties leads to reputational damage, which could increase staff turnover.
When is it legal to withhold or deduct pay?
Deductions from wages can only be made if it’s a legal requirement, for example, income tax, National Insurance contributions, or court orders. They may also be legal if there’s a written clause in the employment contract, or if the employee has given written agreement to the specific deduction.
What should I do if I know I can’t pay employees on time?
You should notify the affected employees as soon as possible, explaining the reason, and outlining a timeline for when they can expect payment.
Get expert help on avoiding late payment of wages
You should have a strong procedure in place when dealing with contracts and salaries.
Follow the legal procedure on employee wages; allowing you to avoid court hearings, and financial penalties.
Demonstrate a clear procedure to your staff if wages are not paid on time. Legal compliance with UK payroll laws can protect your business from potential disruption.
Get expert advice on building employment contracts with our team today. Give us a call on 0800 028 2420.
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