Employee pay and wages

Pay and wages – problems and solutions

At the time of writing, the COVID pandemic is having a huge impact on the UK employment market. The UK government introduced a furlough scheme, covering the majority of employee pay and wages when unable to work. In a moment we will look at payment problems in “normal circumstances” but if you have issues with furlough, you should speak with your employer as soon as possible.

If your employer is unable to provide the answers you require, you should consider a formal grievance. At this point a formal employment legal procedure will be activated.

What should you do if your pay is wrong?

The majority of payment issues tend to be human error or misunderstandings, which are resolved fairly quickly. As soon as you ask your employer why you have been underpaid, this should prompt a thorough investigation and provide reasons for the problem.

On occasion, we have seen disputes between employers and employees with regards to discrepancies in their wages. It may be that an employee has worked additional hours, above and beyond their contracted hours, believing they would receive additional payment. However, it is very dangerous to automatically assume additional payment for additional hours, unless there is a clause in your employment contract.

If you ever experience an issue with your wages, it is important that you act sooner rather than later. Unfortunately, if you fail to raise the issue of short payments within three months, it can be difficult to reclaim missing funds. So, if you believe there is a discrepancy in your monthly income then you should take action immediately.

Is there an issue with your payslip?

Many people are unaware but your employer is legally obliged to provide a payslip, each time a payment is made. The payslip will detail hours of work, hourly rate, gross income and deductions such as tax and pension payments. It should also clearly define any overtime and enhanced hourly rates.

If you believe there has been a problem you should check your payslip to see whether:-

  • Overtime, commissions, bonuses have been paid
  • The hourly rates for traditional hours and overtime are correct
  • Additional payments such as holiday pay, maternity pay or sick pay are identified
  • You have been credited with the correct number of hours, split between contracted time and overtime
  • Excessive deductions have been made from your gross pay

In theory, all of the information you require should be on your payslip. Unfortunately, some employers failed to deliver payslips in a timely fashion. Obviously this is illegal, and without detailed information it can be difficult to know whether you have been paid for all of your working hours.

Taking a conciliatory approach to your employer

It is advisable to take a softly softly approach when speaking with your employer about an issue with your wages. There is no point in going in heavy-handed, making unsubstantiated accusations, often with limited information. If you approach with an attitude that “you don’t quite understand your payslip” this gives your employer the chance to look into the matter further.

There may be times where you disagree with your employer’s feedback. In this scenario it is important that you have evidence to further back up your claims, and explain why you disagree. This then puts the ball back into the court of your employer, and would normally prompt them to go into more detail. If it transpires that your employer has made a mistake with your wages, this should be rectified immediately, and not at the next payday. This is a tactic that many employers will use when they have short paid an employee!

Common issues when your wages are incorrect

When you take into account taxation, pensions, overtime and the variety of different paid leave available, any payment shortfall could be down to a number of issues. With the more common problems including:-

Overpayment of tax

While an overpayment of tax can happen at any time, often when your tax code has changed, the most common scenario is when you start a new job. Many people are placed on an emergency tax code prior to forwarding their details to the HR Department and the updating of company records. So, there is a chance you could overpay your tax for a maximum of two or three months. However, over the course of the tax year this situation will resolve itself with reduced tax payments further down the line.

If for some reason your emergency tax code is not updated, or the company continues to deduct excessive tax, you should speak to your HR department. If you have no luck, the next port of call would be HMRC – they would be able to update your details over the telephone.

Understated hours of work

If you work additional hours, above and beyond your traditional working day, it is important that you:-

  • Confirm these are paid extra hours
  • Have authorisation from your employer
  • Keep your own record of overtime

Some companies will have daily timesheets, or email clarification of daily overtime, while others take a more casual approach. We have seen numerous occasions where individuals have missed the deadline for logging overtime prior to payment of their wages. In this scenario, very often you will see “missed overtime” added to your next monthly payment. Be aware of your reporting obligations in this scenario.

Even if your employer has a formal system of logging overtime, it is sensible to keep a record for yourself. You never know when you might need it!

Unexpected deductions from your wages

In a perfect world, your employer should make you aware of any forthcoming extra deductions from your wages. Employers do have a degree of discretion when deducting “fair” monies from your wages. These might include:-

  • Contractual deductions such as damages, cost of uniform, training expenses, etc
  • Student loan repayments
  • Tax and national insurance contributions
  • Arrestment of wages by local authorities to cover personal debts (such as council tax)
  • Repayment of previous overpayments
  • Unpaid time off work

In recent times the UK government has strengthened the powers given to local authorities to arrest wages. You should be pre-informed of an arrestment of your wages, by your employer or the local authority, but on occasion we have seen a breakdown in communications. In this instance, it is probably best to approach the local authority directly and set up your own affordable repayment plan. Many local authorities will be pleased to get the money at some point, no matter how long it takes!

The situation for agency workers can vary quite markedly. On occasion, you may find yourself working for an umbrella/payroll company where additional deductions such as administration/service charges are commonplace. There are two things to consider here:-

  • You should be informed of any administration/service charges beforehand
  • Deductions should be detailed on your payslip

Whoever pays your wages, if you spot any discrepancies it is important that you make them aware immediately.

Workforce deductions

Those who work in the hospitality industry, such as bars, restaurants and shops, may have certain clauses written into their employment contracts. One of the more common clauses relates to deductions as a consequence of money missing from the till or damaged stock. While this is perfectly legal, there are numerous regulations to abide by such as:-

  • Written confirmation of such deductions
  • Maximum monthly deductions cannot exceed 10% of your monthly wage
  • Monies owed should be claimed within 12 months of the incident
  • All deductions should be clearly identified on your payslip

While this type of deduction is commonplace in the hospitality industry, you should still check the validity of such deductions. If you believe there has been a mistake you should provide:-

  • Copies of your payslips showing the level of deductions (no more than 10% of your monthly payment)
  • Evidence of a written arrangement for payment which differs from the monies deducted

You may also be able to fight any deductions if you’re hourly rate was to fall below the minimum wage for your age bracket. It is not difficult to see how these situations can sometimes become relatively complicated. If your employer is not providing the relevant answers/details, it may be time to take professional advice.

Non-payment of paid leave entitlement

There are many statutory payments you may be entitled to as part of your employment which include:-

  • Sick pay
  • Paternity leave
  • Maternity leave
  • Shared parental responsibilities
  • Adoption leave

For example, statutory sick pay is a maximum of £95.85 per week, paid by your employer for up to 28 weeks. There are some industries which will have enhancements on statutory payments written into employment contracts. This is why you should be fully aware of the terms and conditions of your employment. You may well be getting shortchanged but not know it!

In recent years we have seen the introduction of equality regulations which give equal rights to maternity/paternity leave for both parents. While your employer should be fully aware of the rules and regulations, and statutory payments, it does no harm to keep yourself abreast of any changes.

If for any reason you believe you have been shortchanged by your employer, but they have refused to correct this, the next port of call would be HMRC. They would be able to check your entitlement to various paid leave. However, claims must be lodged within six months of the date you should have begun receiving the statutory payments.

Problems with holiday pay

The rules and regulations regarding holiday pay are relatively straightforward. As you’ll see from the following table, there are clearly defined holiday entitlements based upon your normal working week.

Normal working week Paid holiday entitlement per annum
Five or more days 28 days
Four days 22.4 days
Three days 16.8 days
Two days 11.2 days
One day 5.6 days

The statutory paid holiday entitlement per annum works out at 5.6 weeks per year, for a traditional working week. Bank holidays and public holidays are included in your statutory entitlement – although some employers will enhance employee terms. For example, some employers will increase your paid holiday entitlement based upon your length of service. Others may simply enhance statutory holiday entitlement as a means of rewarding employees – allowing public holidays in addition to statutory obligations.

So, whether you have an enhanced holiday entitlement, or the minimum statutory allocation, these should be detailed in your employment contract. If your employer has indicated they will provide you with an employment contract, this should be done within two months of starting work. Surprisingly, there is no legal obligation to provide employees with a written employment contract – although all terms and conditions will be provided on demand.

Employer has ceased trading

Unfortunately, due to the competitive nature of business today, some companies will struggle and ultimately cease trading. This can be an extremely traumatic period for an employee, often struggling to make ends meet and cover their living expenses. If a business is insolvent they may be able to continue for a short while, under the watchful eye of an administrator/receiver. In this scenario your employer may:-

  • Make you redundant
  • Transfer your employment contract to a new owner
  • Ask you to keep working in the short-term

While obviously you have little in the way of control if made redundant, you may well be entitled to a redundancy payment. Many people automatically assume that transferring to a new employer or continuing to work in the short-term is the best solution. It is important to think very carefully, taking advice where applicable, when in this situation. Ask yourself:-

  • Have your years of service been respected?
  • Have your employment benefits been reduced?
  • Are there any adjustments to your employment contract?

In the event that your employer is unable to honour their debts and financial obligations, you may be entitled to assistance from the government. It will depend on your individual situation but the government may fund:-

  • Redundancy payments
  • Holiday pay
  • Unpaid wages, overtime, commissions
  • Statutory notice payments

Again, dependent upon your individual situation, you may also be entitled to an array of unemployment benefits and assistance with living expenses. So, no matter how dire the situation appears, it is important to check out your entitlements and whether the government is obliged to cover these.

Cash flow difficulties

There are many genuine situations where a company might experience short-term cash flow issues which can sometimes be rectified. However, long-term cash flow issues can have an impact on a company’s reputation and payment terms with suppliers. What is often a “fixable situation” can deteriorate quite quickly if there is a loss of confidence amongst suppliers.

Some of the more tell-tale signs that your employer may have cash flow difficulties include:-

  • Part payment of monthly wages
  • No explanation for delayed/unpaid wages
  • Numerous employees experiencing monthly payment shortfalls

In a perfect world, you would simply approach your employer and request details of any issues. In reality, if your employer is experiencing financial difficulties they may not be as forthcoming with the details as you might’ve hoped. As a consequence, if the indications are that your employer is experiencing cash flow difficulties causing an underpayment of wages, it may be sensible to take professional advice.

How to address wage shortfalls

While any employee is perfectly entitled to take professional advice, it is probably sensible to clarify exactly what is going on before going down the legal route.

  • Contact your union representative

Many industries now have trade union representation that can speak on behalf of employees. Rather than numerous employees asking the same questions of their employer, appointing one union contact is often the best way forward.

  • Raising a formal grievance

If your employer is unwilling or unable to respond to your union representative, it may be time to raise a formal grievance. Once you have begun the formal grievance process, it is very difficult to backtrack. Ultimately, this can impact employer/employee relations.

  • Use of conciliation services

There will be occasions where employers have a genuine short-term issue which is impacting cash flow and/or employee relations. Sometimes, the use of conciliation services such ACAS can bring both parties together for the long-term benefit of all. Some companies may be a little uncomfortable bringing in third parties, but these services are confidential.

  • Employment tribunal

Whether your employer is simply refusing to fulfil their legal obligation, perhaps there is uncertainty about your actual entitlement or they are in financial difficulty, the option of an employment tribunal is always there. However, you must lodge your complaint with the tribunal prior to 3 months from when the funds should have been paid.


There are numerous reasons why your monthly income may be short, some of which will be short-term while others may have long-term repercussions. Many financial issues are resolved almost immediately; some are genuine mistakes while others are simple oversights.

When approaching your employer for clarification on your wages and payment, it is sensible to give them the benefit of the doubt until you have additional information. Even in a worst-case scenario, where your employer ceases trading, there are still various entitlements which may well be covered by the government.

The path to reconciliation can vary significantly, depending on the individual’s scenario. Where applicable, you should take professional legal advice on employment laws with regard to wages and payments.