Making deductions from a worker's pay
Legally required deductions such as National Insurance and income tax
You must not make deductions from a worker's pay unless:
- they are legally authorised, eg PAYE (Pay As You Earn) income tax, National Insurance contributions, deductions from earnings orders, student loan repayments
- they are allowed by the worker's contract - workers must have a copy of the relevant contractual term or a written explanation before you make the deduction
- they have agreed to the deduction in writing before the deduction was made
You don't always have to meet these conditions, for example when:
- you make deductions to refund an overpayment of wages or expenses
- the worker is on strike
- the deduction is to satisfy a court order, eg to recover debts
Deductions for child maintenance
The Child Maintenance Service (CMS) of the Department for Communities (DfC) may ask you to make deductions from an employee's pay for child maintenance purposes. They may issue you with a deduction from earnings order and ask you to establish a regular pattern of payments. See how to make child maintenance deductions from an employee's pay.
Direct Earnings Attachments
As part of the Welfare Changes in Northern Ireland, you may now be asked as an employer to deduct benefit overpayments, including social fund loans, that an employee owes the Department for Communities (DfC) from their pay. Read more on Direct Earnings Attachments: making deductions from an employee's pay.
Deductions from the wages of retail workers
If your workers do retail work, you may make deductions from wages to recover cash shortages or stock deficiencies only if, in addition to meeting the above conditions, you:
- inform the worker, in writing, of the total shortfall you are recovering before you make the deduction
- issue a written demand on a pay day for the repayment
- make the deduction - or the first in a series - no sooner than their first pay day after telling them of the shortfall or, if you tell them on a pay day, not before that day
- do not deduct more than one tenth of the worker's gross pay on any given pay day - you can recover any remaining shortfall on future pay days (note that one tenth of gross pay does not apply when making the final payment on termination of employment)
- make the first deduction within 12 months of discovering the shortage
You should ensure that any deductions for shortages or stock deficiencies are not made unless you have conducted a thorough investigation to establish that the employee is liable for these. You should also take care when making any deductions not to breach minimum wage, as deductions must not reduce your employee's pay below the current minimum wage rate.