The issue of unpaid wages will undoubtedly cause a large amount of stress and inconvenience to an employee. You can bring a claim against your employer in an employment tribunal if:
- You haven’t been paid at all; for work you have done
- Deductions have been made from your wages (so you received less than you were expecting) and these were not authorised; or
- you wish to challenge the amount you’ve been paid.
Tribunal proceedings can be stressful as well as taking many months to conclude, so before you go down that path, it’s worth exhausting all other avenues.
Is my pay wrong?
As an employee, you are legally entitled to an itemised payslip. Since 6 April 2019, this right also extends to workers (a different category of staff who do not have a contract of employment but provide their work personally and are not in business on their own account). Where pay varies according to hours worked, for example if doing overtime, the payslip must show the hours worked.
It may sound seem obvious, but if you wish to dispute your pay and/or entitlements, check the details on your payslip first. If you don’t understand how your pay has been calculated it’s important to talk to your HR team or whoever is responsible for payroll and ask them to explain so you can be clear about your entitlements.
It may also be helpful to go back and check your employment contract against your payslip to ensure you are getting what you are contractually entitled to receive.
If you haven’t received a payslip, ask for one or for written details as to how your pay has been calculated. Explain to your employer why you think it may be wrong. It’s always better to put this in writing, for example in a letter or email.
If your employer does not respond promptly then you may need to raise a formal grievance using your employer’s grievance procedure. This can usually be found in the staff handbook or intranet; ask HR for a copy of the procedure if you can’t find it.
If your employer agrees that there has been a mistake, they should ideally pay back any shortfall straightaway – without you having to wait until the next payroll processing date.
My employer has made unauthorised deductions from my wages
There are certain things your employer must, by law, deduct from your wages. There are also things they may deduct if you have agreed to this in writing, for example in your employment contract or subsequent agreement. These include:
- income tax
- national insurance contributions
- pension contributions
- overpaid wages
- trade union subs
- certain training costs
- uniform allowance
- season ticket loan
- payments for benefits such as private medical insurance for family members
- payments into savings schemes such as SAYE
If your employer has deducted something else which you did not agree to, it may be an unauthorised deduction. Once again, check with the individual or team responsible for payroll and ask them to explain any deductions, in the first instance.
I haven’t been paid at all
If this is the case, speak to your employer or payroll team to find out why you haven’t been paid. This can often be enough to ensure the problem is rectified immediately.
Raising a grievance about unpaid wages
If you still haven’t been paid, or paid what you think you are entitled to, check your employer’s grievance procedure and follow the steps involved. All employers need to provide a means for employees to raise grievances. However, if there isn’t a formal procedure, record the details of your non- or underpayment in writing. Sign and date your record, and include any reasons why you believe you have been underpaid. Keep a copy and details of when you gave this record / complaint to your employer.
Legal letter before action
Letting your employer know you are serious about pursuing legal action can encourage them to act. The threat of litigation is sometimes enough to get an employer to rectify the situation as they do not want the bad publicity or hassle of dealing with an employment tribunal claim.
Instructing a solicitor to send a letter on their headed notepaper setting out why they think you have been paid incorrectly and that you intend to issue proceedings if not resolved, can prove to be a good investment if it persuades the employer to pay up.
Before you can issue proceedings against your employer in a tribunal, you must notify ACAS (the Advisory, Conciliation and Arbitration Service) and complete an ACAS Early Conciliation Notification Form. The ACAS conciliation procedure involves an independent third party, who will try to help your resolve your dispute. This is a free service.
ACAS will contact your employer, but they are not able to force your employer to pay. That said, in many cases, ACAS can help parties resolve the matter without further action. If the ACAS process is unsuccessful, you will have to issue proceedings in an employment tribunal.
Time limit for making a claim for unpaid wages
It is important not to delay too long in waiting for your employer to sort out your payments. Claims for unpaid wages or unauthorised deduction from wages must be made within three months, starting on the day you should have been paid the money. If a series of payments is due, the last non-payment date is the relevant one. Time spent during ACAS early conciliation is not included within the three-month period.
With luck, issuing a claim against your employer may be enough to get them to pay you your unpaid wages straightaway. If it isn’t, an employment judge will decide whether your employer owes you money and if so, how much. Your employer will then be ordered to pay any money owed. It does not cost anything to issue a claim in the employment tribunal but, the general rule is that each party must pay their own legal costs (with some limited exceptions).
What happens if my employer still doesn’t pay my unpaid wages?
The employment tribunal is not able to enforce its own judgement, although they will set a date by which payment has to be made. If your employer still hasn’t paid after 48 days, you must apply to the Department for Business, Energy and Industrial Strategy’s enforcement team.
They will issue your employer with a ‘Warning Notice’. If your employer still fails to pay within 28 days, they are liable for a financial penalty equal to half your award (minimum £100; maximum £5,000).
If the employer still fails to pay, you can utilise the fast-track scheme. This involves a High Court Enforcement Officer (comparable to a bailiff) being dispatched to demand payment. However, you cannot take any enforcement steps if your employer has appealed; they have 42 days from the employment tribunal judgement in which to do so.
Can I resign due to unpaid wages?
An occasional late payment or accidental unauthorised deduction from wages is not generally treated as a fundamental breach of your employment contract, assuming it was a genuine mistake and the employer rectified it as soon as possible. Therefore you are not entitled to resign or to treat the matter as an act of constructive dismissal(i.e. when you’re forced to leave your job against your will because of your employer’s conduct).
However, if your employer regularly and persistently fails to pay you, the situation may be different. Under such circumstances, we would always advise that you seek legal advice prior to leaving your job.
What happens if my employer is insolvent?
If your employer is insolvent, it is unlikely that the full amount you are owed will be paid. What happens next will depend on the legal status of your employer and what happens to the business.
Some debts, including holiday pay and wages, will be treated as preferential debts, which means they must be paid by any administrator before certain other debts. There are also special arrangements for employees to claim a basic minimum of debts owed to them from the National Insurance Fund (funded by the State). These claims include:
- a statutory redundancy payment
- holiday pay
- outstanding payments like unpaid wages, overtime and commission
- money you would have earned working your notice period
However, there are limits on how much an employee can claim so, if you are a higher earner you are unlikely to recover everything you are owed.