What Is an Unlawful Deduction of Wages?
Under Part II of the Employment Rights Act 1996, an employer cannot make deductions from wages unless:
- Required by statute (e.g. income tax, National Insurance)
- Authorised by the employee's written contract (e.g. contractual pension contributions)
- The employee has given prior written consent in that specific case
A unilateral wage reduction, deduction for alleged damage or stock shortfall (without contractual authority), withholding of earned commission or bonus, or failure to pay at all — all constitute unlawful deductions. Claims are brought under s.23 ERA 1996 in the Employment Tribunal.
Types of Unpaid Pay Claims
Employer fails to pay some or all of your monthly salary, withholds payment after resignation, or makes unauthorised deductions
You are entitled to 5.6 weeks' statutory holiday per year (28 days for a full-time worker). Holiday pay must be calculated at your normal remuneration — including regular overtime, commission, and other regular payments
Contractually earned commission or bonuses that have been withheld, capped improperly, or unpaid after your notice period
Failure to pay contractual or statutory notice (1 week per year, up to 12 weeks) when employment ends, or payment less than the full amount due
Every worker is entitled to NMW regardless of contract type or how they are paid. NMW rates from April 2024: £11.44/hr (21+), £8.60 (18–20), £6.40 (16–17). Apprentices £6.40. Calculated per hour including all working time
Statutory Sick Pay (SSP) is £116.75/week (2024/25) for eligible employees. Contractual sick pay disputes where your employer refuses to pay the agreed rate
Holiday Pay — More Than Just Basic Pay
Following the Supreme Court's decision in Harpur Trust v Brazel [2022] UKSC 21 and a line of cases including Bear Scotland v Fulton, holiday pay must reflect your normal remuneration, not just contractual basic pay. This means:
- Regular voluntary overtime must be included in holiday pay calculations
- Regular shift premiums and unsocial hours payments must be included
- Regular commission payments must be included
- The reference period is the previous 52 weeks in which you were paid
Many employers calculate holiday pay based on basic salary alone — this is unlawful where you regularly earn more through overtime or commission. The underpayment accumulates over years and can be significant.
Claiming a "Series of Deductions"
Where an employer has repeatedly underpaid holiday pay or wages, each underpayment forms a link in a "series of deductions." Under s.23 ERA 1996, you can claim the entire series if you bring the claim within 3 months of the last deduction — meaning historic underpayments can be recovered, but only up to 2 years' worth under the Deductions from Wages (Limitation) Regulations 2014.
A gap of 3 months or more between deductions breaks the series — so the earlier deductions outside this window cannot be claimed under the unlawful deductions route (though a breach of contract claim in the civil courts may still be available).
National Minimum Wage — Key Rules
How Unpaid Wages Claims Work
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1
Write to your employer
Before escalating, put your claim in writing — setting out the amounts owed, the dates, and the basis for the calculation. This demonstrates good faith and creates a paper trail. Keep a copy of all responses.
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2
ACAS Early Conciliation — within 3 months
Mandatory before lodging an ET claim. EC for unpaid wages is often resolved quickly because the amounts are usually calculable. A conciliated COT3 settlement is binding.
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3
Employment Tribunal (ET1)
If conciliation fails, your solicitor files an ET1 claiming unlawful deduction of wages and/or holiday pay. Tribunal claims are usually heard by an Employment Judge sitting alone. Most straightforward cases are resolved at a short hearing or on written submissions.
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4
Civil courts (alternative for breach of contract)
For amounts over £25,000 (the ET breach of contract cap), or where the 3-month ET time limit has passed, a claim in the County Court or High Court may be available. A 6-year limitation period applies for most contract claims.
Frequently Asked Questions
Can I claim for holiday pay I did not take?
Accrued but untaken statutory holiday pay (up to 28 days per year) must be paid out when employment ends. During employment, you are generally not entitled to payment in lieu of untaken statutory leave — you must take it as actual leave. Your contract may give more generous rights to carry over or be paid for unused leave.
My employer says my commission is discretionary — can I still claim it?
It depends. Truly discretionary bonuses (where the employer has genuine unfettered discretion) are harder to claim. However, courts have held that even discretionary bonus schemes carry an implied term that the employer will not exercise the discretion irrationally or capriciously. If a bonus has been paid consistently or if targets were met, a claim may still succeed.
My employer is insolvent and cannot pay me — what do I do?
Where an employer is insolvent, you can claim unpaid wages (up to 8 weeks), holiday pay (up to 6 weeks), unpaid notice pay, and redundancy pay from the National Insurance Fund via the Insolvency Service (RP1 / RP2 forms). An employment solicitor can assist with the claim process and advise on priority in the insolvency.
I am self-employed — can I still claim NMW?
Genuine self-employed contractors are not entitled to NMW. However, many people labelled "self-employed" are in fact "workers" under the Employment Rights Act 1996 — particularly where they have obligations of personal service and the other party is not a client or customer. Uber, Deliveroo, and similar cases have established that contractual labels do not determine status. A solicitor can assess your working arrangements.
What is the maximum I can claim in the Employment Tribunal for unpaid wages?
There is no cap on unlawful deduction of wages claims in the Employment Tribunal. However, the ET's jurisdiction for breach of contract claims (e.g. notice pay, holiday pay in lieu) is limited to £25,000. For amounts above this, a County Court or High Court claim is necessary. There is also a 2-year cap on historical deductions under the Deductions from Wages (Limitation) Regulations 2014.