Rights to pay

For most people in the workplace receiving a fair rate of pay is one of the most important conditions of employment. Trade unions have an effective track record in negotiating improvements to pay. Union representatives also work to ensure that members receive the pay they are entitled to, including ensuring workers do not face pay discrimination.

All workers are entitled to be paid for the work they have done. ‘Employees’ are also entitled to be paid if they are ready and willing to work but their employer has not provided them with any work to do – that is, unless their contract of employment states otherwise. ‘Workers’ are usually employed on an ‘as required’ basis and therefore will usually not have a right to be paid if the employer has no work for them.

How much pay?

Most people are paid a basic salary or hourly rate but some will be paid on a piecework basis or according to their performance. Different organisations will operate different pay systems, including:

• Basic rate schemes: under basic rate schemes, individuals tend to be paid in relation to a period of work (for example an hourly or weekly rate or an annual salary). A grading structure may be developed through a job evaluation scheme, which is used to put jobs into an appropriate grade or band in the organisation. Pay increases may depend on moving up a scale, skill development, promotion to another grade, or a general up-rating of pay levels.
• Incentive schemes linked to individual or organisational performance: Under incentive schemes, individuals are paid in part or wholly by results, piecework or bonuses. Performance-related pay and bonuses are often assessed and awarded through appraisal systems.

Many employees will also be paid overtime, unsocial hours pay, risk payments and/or bonuses or performance-related pay. Employees will also usually benefit from annual pay increases, but they will not have an automatic right to a pay rise unless their contract provides for it. Remuneration packages may also include pension contributions, childcare vouchers or access to workplace crèches, or benefits such as company cars and gym and social club membership.

Salary sacrifice schemes

An employer can offer benefits such as childcare or transport services to employees under a ‘salary sacrifice’ scheme. This is a scheme that allows a worker to give up part of their salary in return for vouchers to pay for childcare. There can be tax advantages to these schemes, but receiving a childcare voucher instead of pay may reduce an individual’s pay to below the lower earnings limit and could affect their right to certain benefits.

The national minimum wage (NMW)

Workers in the UK aged 16 (and above school leaving age) or over are legally entitled to a NMW hourly wage, regardless of where they work, the size of the firm or the worker’s occupation. This includes casual labourers, agency workers, homeworkers, workers on short-term contracts and workers employed by sub-contractors.

Workers who aren’t entitled to the NMW

• workers aged under 16
• some workers living and working within a family such as nannies and au pairs – such a worker will not be entitled to the NMW if they live in the family home where they work and they share meals with the family and they do not have to pay towards their accommodation costs or meals
• genuinely self-employed people (see the Acas advisory booklet How to Tell the Difference Between an Employee and a Self-employed Person)
• members of the armed forces (but civilians working for the reserve forces or the Ministry of Defence are covered)
• share fishermen
• prisoners
• voluntary workers
• some trainees on government schemes
• some trainees on European Community schemes (for details of which trainees are not entitled to the NMW, contact the Pay and Work Rights helpline or an experienced adviser)
• workers who are homeless or living in a hostel, who are entitled to Income Support, income-related Employment and Support Allowance or income-based Jobseeker’s Allowance and who are taking part in a scheme run by a charity that provides them with work
• residential members of religious communities that are charities
• office holders such as company directors.

How much is the NMW?

For the latest figures please visit Gov.uk 

Apprentices

Apprentices under the age of 19 or in the first year of their Apprenticeship are entitled to a special minimum rate of £3.90 per hour from April 2019 (check Gov.uk for current rate) Once you have worked as an apprentice for a year, if you have reached the age of 19 and are still working for the same employer, you will be entitled to the normal minimum wage for your age (see above).

Which types of pay and which hours of work count towards the NMW?

The rules about which elements of a worker’s pay, and which hours of working time, count towards calculating the NMW are very complicated and need to be considered on each case. If you need advice on this please contact your union.

Pay and equal treatment

When deciding how much to pay a worker, employers must ensure that they do not discriminate on grounds of sex, marital status, race, sexual orientation, disability, age, religion or belief. An employer cannot also pay an individual less simply because they work part-time or are employed on a fixed-term contract and since 1 October 2011 it has been unlawful for an employer to pay an agency worker less than comparable directly employed staff after 12 weeks in the same job for the same hirer. It is also unlawful to pay an individual less because they are a trade union member or activist (see rights at work section).

Pay during absences from work

Holiday pay

All workers have the right to at least 28 days’ paid annual leave (or pro rata rights for part-time workers). Employees’ contracts may also provide for additional paid holiday rights, including rights to time off on public holidays. See the working time section below.

Sick pay

Most workers will also be entitled to at least statutory sick pay when they are absent from work because of sickness. In many workplaces unions have successfully negotiated contractual sick pay, ensuring members receive their normal pay during periods of sick leave, for example for 6 months or 12 months.

During recessions and public sector cuts some employers seek to reduce contractual sick pay entitlements, either by reducing the period of time during which employees receive normal pay or proposing that they receive only statutory sick pay.

Statutory Sick Pay: the law

Workers do not have a statutory right to be paid their normal pay during periods of sickness absence; they have the right only to statutory sick pay, which is subject to a statutory limit.

Most workers will be entitled to SSP where they are absent from work for more than three days.

In order to qualify for SSP an individual must:

• be in work
• be earning enough to pay Class 1 NI contributions (£109 per week from April 2013). If an individual’s pay varies, their entitlement will depend on their average pay over the last eight weeks before their illness began, and
• be absent from work due to illness for at least four consecutive days (including weekends, bank holidays and days that they do not normally work).

They will not qualify if they are genuinely self-employed, have not started work yet or if their pay is too low. The employer should give the individual a SSP1 form and tell them why they are not entitled. (Individuals may be entitled to Employment and Support Allowance instead.)

If an individual qualifies for SSP, it is normally paid in the same way as their wages at a flat rate (£88.54 a week from April 2015). SSP can be paid for up to 28 weeks, if their sickness lasts that long. It is not paid for the first three days of sick leave; these are called ‘waiting days’.

Employers can ask for reasonable evidence of incapacity for both statutory and contractual sick pay. In practice, this usually means the completion of a self-certification form for the first seven days of absence (including the first three waiting days) and a doctor’s certificate after that. Representatives and individuals should be aware of the employer’s procedures for reporting sickness absence and comply with these. Employers should not, however, refuse SSP where an individual provides medical evidence of sickness.

Contractual sick pay

Employees’ contracts of employment may provide for sick pay above the statutory minimum. The right to sick pay does not to be in writing; it can exist as a result of custom and practice. So, if an employer has always paid staff during periods of sickness, all workers are likely to have a contractual right to sick pay.

Where a contractual right to sick pay exists, employers cannot unilaterally reduce entitlements. Imposing reduced sick pay can be a breach of contract or can amount to an unfair deduction from pay.

Employers must not provide less-favourable treatment on contractual sick pay for part-time workers or for fixed-term employees. Under the Agency Worker Regulations 2010, agency workers will not have a right to equal treatment on workplace sick pay arrangements, though they will be entitled to SSP if they meet the qualifying criteria below.

Maternity pay and paternity pay

Most workers will be entitled to some pay during periods of maternity and paternity leave. However, there is no automatic right to be paid their usual rates of pay.

Employees also do not have a statutory right to be paid when they take parental leave or where they take leave in order to care for a dependent. Often, however, unions have negotiated rights to pay during such absences.

Medical suspension pay

Certain health and safety regulations require employees to be suspended from work on medical grounds when their health would be endangered if they continued to be exposed to a substance specified in the regulations. These cover ionising radiation, lead and some other hazards. Employees suspended for this reason can claim if they have one month’s continuous employment and if they are fit for work (provided they have not unreasonably refused suitable alternative work offered by the employer).

Other reasons for absence

Although employees have a right to reasonable time off for public duties, they do not have a right to pay where they are absent from work while, for example:

• if on jury duty
• if performing public duties, for example serving as a school governor or a councillor.

Employees will have a right to be paid only where this has been negotiated through a collective agreement or the employer has agreed that pay will be provided.

An employer can also refuse to pay wages for a period of time when an employee has participated in industrial action.

How should an employee be paid?

There is no legal right to have wages paid in any particular way, for example directly into a bank account. Employees have the right to be informed in the written statement of terms and conditions the intervals at which they will be paid, be it daily, weekly, monthly or at some other interval. Usually this information will be included in a written contract of employment or in a letter of appointment.

Right to a pay statement

All employees are entitled to an individual written pay statement, at or before the time they are paid. The pay statement or payslip must show:

• gross pay, that is, pay before any tax or NI has been taken off
• the amounts of any deductions that change from week to week, for example tax and NI, and what the deductions are for
• the total amount of any fixed deductions. These are deductions that do not change from week to week, for example union subscriptions. An employer does not have to give details of what these deductions are for as long as they provide a separate statement with these details at least once a year
• the total amount of take-home pay after deductions (see Deductions from Pay).

What counts as wages?

The law states that employers cannot make unauthorised deductions from wages. Wages cover more than an individual’s pay, which is the hourly, weekly or salaried rate the employer pays for a type of work. Wages are what the employer pays in connection to an individual’s employment and include all forms of remuneration connected an individual’s employment whether under an individual’s contract or otherwise, including:

• hourly or weekly rates or salaries
• overtime payments, shift payments and risk payments
• bonuses and commission
• holiday pay
• other contractual benefits including pay during family-related leave and sick leave.
• Statutory Sick Pay
• Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay
• pay during medical suspension
• guarantee payments that individuals receive when they are laid off because no work is available
• pay for time off for trade union duties or training
• any vouchers provided by an employer that can be exchanged for services or benefits, e.g. childcare vouchers, lunch vouchers or eye test vouchers
• protective awards where an employer has failed to consult properly on collective redundancies or TUPE transfers
• any payments awarded by an employment tribunal where an employee is reinstated or re-employed, including after dismissal on trade union-related grounds.

The following are not included in the statutory definition of wages:

• payments relating to pensions, a retirement or redundancy pay
• expenses or money spent on work refunded by the employer
• loans or advances of wages.

Deductions from pay

The law protects people from having unfair deductions made from their wages, including complete non-payment.

The protection applies to all ‘employees’ and ‘workers’. It also applies to apprentices, people working under a contract for services, Crown servants, anyone who works on board a ship registered in the UK – unless they work mainly outside Great Britain, are not ordinarily a resident in Great Britain, or are employed under merchant shipping legislation.

By law, an employer is entitled to make only certain deductions from an employee’s pay. If the employer does not pay the employee at all, this counts as a 100 per cent deduction.

When can an employer make deductions from wages?

The law states that an employer can make a deduction from a worker’s wages only where:

• the deduction is required or allowed by law, for example Nl, income tax or student loan repayments
• a worker’s contract of employment authorises the deduction. There must be a specific clause in the contract allowing for that particular deduction to be made. The employee must be given a written copy of that term in the contract before any deduction is made under it. This would cover deductions such as union dues or payments to a pension scheme, or
• a worker agrees in writing to the deduction.

An employer can also make deductions where the deduction is due to:

• the worker having been genuinely overpaid
• the employee having taken part in industrial action
• a court order or an order from an employment tribunal.

Note that an employer cannot make a deduction that will reduce an employee’s pay below the NMW rate (except in the case of the accommodation offset). This is the case, even if a worker agrees to the deduction.

Where an employer makes an unauthorised deduction from wages, an individual may be able to make a claim for unfair deductions from pay under Section 13 of the Employment Rights Act 1996 or a claim for breach of contract. Deduction from Wages (limitation) Regulations 2014 limit claims to two years recovery of loss. However, an employee should always seek to raise a grievance first. Not only is this likely to assist an employee in recovering the money owed earlier but it would also reduce the risk of reduced compensation in an employment tribunal. Union representatives may also decide to deal with the issue collectively, especially where more than one worker is facing the same unfair deduction.

Retrospective agreement to deductions

An employer will not be able to make retrospective deductions from pay by relying on a change in a contract that is agreed after certain conduct has taken place or on a written statement from the individual that they agree to the deduction. Similarly, although an employer could ask individuals to sign a deductions agreement after an event, but they cannot deduct any money unless it happens.

For example:

• If an employer asks an employee to agree to a new contractual term that permits the deductions of pay due to lateness, the employer will be able to rely on this clause only for future instances of lateness, not for past instances.
• If in a restaurant where a customer leaves without paying, employers cannot make a deduction from pay unless a worker has signed a written, pre­standing agreement with the employer that any deductions can be made from their pay.

Paying back overpaid wages

In general, overpayments of pay or expenses are recoverable by an employer. Union representatives, however, should seek to ensure that employer’s act reasonably when seeking to recover overpayments, for example by agreeing to phased repayments that are manageable for the member.

There are very limited exceptions to the ability of an employer to recover pay. In such cases, a worker will not be able to make a claim for unlawful deductions from pay; but they may have a claim for breach of contract. However, representatives should always seek advice before considering legal action in this area.

Role of the representative: pay

Union representatives will seek to ensure that working people receive fair pay, reflecting the rate for the job and the need to maintain living standards. As discussed in the equality section of this book, union representatives also have a key role in ensuring that pay systems are not discriminatory. One way of achieving this is through the development of job evaluation schemes that are equality proofed. The ability of representatives to negotiate pay rates and pay systems will depend on the workplace and the sector. In some parts of the public sector, pay rates are determined by government following recommendations from pay review bodies. In some sectors, pay rates are negotiated through national agreements. In other sectors and workplaces, pay rates and pay systems are negotiated with one employer.

The ability of representatives to negotiate pay increases will also be influenced by other factors, including: the profitability of the organisation; external funding arrangements, including funding from central government for public services; the terms of any procurement process; and, most significantly, the level of union organisation. The statutory right to disclosure of information for the purposes of collective bargaining can be used by recognised unions to gather relevant information to assist in evidence-based bargaining. Recognised unions have the right to request written information from an employer for the purposes of collective bargaining under Section 181 of the Trade Union and Labour Relations (Consolidation) Act 1992. The right is enforced by the Central Arbitration Committee (CAC). There is also an Acas Code of Practice supporting the right. This code states that unions have the right to request information relating to the following for the purposes of collective bargaining:

• seeking to negotiate rights to normal pay during periods of sick leave
• seeking to negotiate rights to normal pay during periods of maternity leave, paternity leave, parental leave and time off for dependents
• seeking to negotiate agreements in relation to time off and pay for public duties
• resisting the inclusion of terms permitting employers to make deductions in pay for intermittent but persistent absences due to sickness or for certain forms of conduct, such as lateness – where employers insist on the inclusion of such clauses, unions can make clear that deductions from pay represent a disciplinary sanction and should be made only following a full disciplinary or capability procedure.
• seeking to negotiate or retain arrangements for union subscriptions.

Checklist

Checking employers comply with their legal responsibilities to pay employees in full 

• Check that all workers receive at least the NMW, excluding the payment of tips.
• Ensure all workers receive a detailed pay slip that itemises basic rates of pay and any deductions.
• Ensure that any deductions from pay have been negotiated and agreed.
• Support members in raising grievances where they suspect they are not being paid the NMW, or have had unfair deductions made from their pay.
• Assess whether more than one member may be affected by the same pay deduction issues and consider whether to raise a collective grievance or to deal with the issue through collective bargaining.

Case law on Section 181 reveals that the information such as on staff deployment, performance (productivity and output data, information from an order book) and financial matters (profits, assets, loan liabilities) is essential for bargaining to take place. The CAC must also be convinced that the disclosure of the information is in accordance with good industrial relations practice.

When seeking to negotiate a pay increase, union representatives may want to take some or all of the following into consideration:

• the profitability of the organisation – using the right to disclosure of information to request information about the profitability of the company may prove helpful; union representatives should also consider researching the company’s accounts as filed with Companies House
• other pay deals nationally, in their sector or locality – the pay research company IDS and Labour Research Department (LRD) provide useful reports on pay deals
• locally recognised living wage pay rates
• changes in the cost of living, including the RPI and CPI
• how the introduction of starter or training rates can be used to reduce pay rates for younger workers, new recruits and agency workers
• rights to overtime payments where individuals work beyond normal working hours.

Non-payment of wages during industrial action

An employer can also refuse to pay wages for a period of time where an employee had participated in industrial action. An employee is unlikely to succeed in a claim for unfair deductions from pay or for breach of contract in these circumstances.

Deductions from shop workers

There are additional protections against deductions made from shop workers’ pay.

The employer of a shop worker can make deductions for cash shortages or missing stock. This could be, for example, because the shop worker has been dishonest or because of theft by a customer.

The employer must give details in writing of the deduction to the employee on pay day. Any deduction for missing cash or stock must be made within 12 months of the employer discovering the shortage. The deduction must be no more than 10 per cent of the shop worker’s gross pay on any one pay day. This deduction can be made in addition to other lawful deductions that the employer is allowed to make.

More information

Acas

www.acas.org.uk

Helpline: 0845 747 4747

Advisory booklets:

• Pay systems provides an introduction to the variety of pay systems currently in operation in organisations
• Appraisal related pay
• Parents at work
• Holidays and holiday pay
• Employing people: a handbook for small firms
• Paying employees – a Getting It Right factsheet.

Pay and Work Rights for National Minimum Wage

www.direct.gov.uk

Helpline: 0800 917 2368

Government guides on the NMW in a range of different community languages, for example, Polish, Slovak and Lithuanian, and employment rights factsheets on the NMW, contracts of employment, deductions from pay etc.

PayWizard

www.paywizard.co.uk

A project to provide and improve data on wages in the UK. Users can see the average pay for their job, and compare between different regions, as well as submitting their own data to improve the accuracy of the results. The project is managed by Incomes Data Services, the TUC, and Wage Indicator Foundation.

TUC

Your Rights at Work , 2012 edition. Covers all aspects of starting a job, parental, pay and holiday rights. [New edition?]

TUC Basic Rights @ Work

www.tuc.org.uk/workplace/tuc-19833-f0.cfm

workSmart

www.worksmart.org.uk

workSmart provides a complete list of situations linked to pay, for example maternity pay and maternity leave, SSP, holiday pay and contracts of employment. It also has an interactive calculator to work out eligibility for the NMW.