Overview of pay (pay rises, pay cuts, notice pay, etc.)

Your employer should tell you when you start work how much you will be paid, how it will be paid to you and when. This must be put in writing within two months of you starting work.

Payslips

Employees (but not workers, contractors, freelancers, etc.) are entitled to a pay slip every time they get paid. This will detail your gross pay, any fixed deductions (e.g. trade union subs – if there is a number of these your employer may give you a separate statement as detailed below), variable deductions (e.g. tax) and net pay.  

If fixed deductions aren’t set out in your pay slip, you must be given a standing statement of fixed deductions. This must:

• be in writing
• say how much the deductions are and how often they will be made.
• outline the purpose/description of the deduction
• be given to you before your first payslip with the fixed deductions
• be updated at least once a year.

If your fixed deductions are to change, your employer must give you notice in writing or an amended statement.

Pay and wages 

Pay is the basic amount you are entitled to be paid (e.g. your weekly/ monthly rate), while your wages are what you should be paid in connection to your job.

Wages include: fees, bonuses, commission, holiday pay; statutory payments, including statutory sick or maternity pay; any vouchers (e.g. luncheon vouchers) of fixed value that can be used to get money, goods or services.

Wages do not include: loans or advances of wages; payments of expenses incurred in employment; pension and redundancy payments; lump sums on retirement; payments in kind; tips and other gratuities. 

Performance-related pay

Your employer may decide to pay you on a performance-related basis so, for example, the harder you work, or the more targets you hit, the bigger your bonus or commission payment.

Performance related schemes must be based on clear, measurable targets agreed by both you and your employer. It will often state in your employment contract that these payments will be made at the employers’ discretion. However, this discretion must be exercised fairly and if you have done what was needed to earn the payment and it’s not given to you, you may be able to take action against your employer – particularly if a fellow employee has been paid the bonus or commission.

You should talk the problem through with your employers first to ensure the non-payment wasn’t a mistake. If it wasn’t an error, ask your employers to set out in writing how your pay was calculated and ensure you keep copies of any letters or notes from meetings which concerned your bonus.

If the matter can’t be resolved, you may be able to sue for:

• breach of contract – the agreement to pay the bonus may have been in writing, agreed verbally or understood to be there due to normal business customs: all would be legally enforceable.
• unlawful deduction from wages (see below).
• unlawful discrimination – you may be able to take a discrimination case over the non-payment to employment tribunal if, for example, the employer pays women a smaller bonus than men when they do the same job and have achieved the same results.

If your bonus is being unreasonably withheld, you are entitled to claim both breach of contract and unlawful deduction from wages, although deductions from wages claims are often easier to make.

Deductions from pay

If an unauthorized deduction is made from your wages, you can bring a case for non-payment before an employment tribunal within three months of the failure to pay you properly.

Your employers can, however, legally make some deductions from your pay, e.g. for PAYE income tax and NICs. Deductions are allowed if you agreed to them in writing, e.g. pension contributions or loan repayments or if they’re permitted by your contract (although you must be given a copy of the relevant contractual term or a written explanation before the deduction is made). They can also make deductions if you have had an overpayment of wages, if you go on strike, or to satisfy a court order.

Retail workers

If you are a retail worker, deductions can be made from your wages to recover cash shortages or stock deficiencies only if:

• you are told, in writing, of the total shortfall being recovered beforehand;
• you are given a written demand on a pay day for the repayment;
• the deduction is made no sooner than your first pay day after being told of the shortfall;
• more than one tenth is not deducted from your gross pay on any pay day;
• the first deduction is made within 12 months of the shortage being discovered.

Pay rises and pay cuts

You have no right to a pay rise unless one is specified in your employment contract but your employers do have a duty to pay their employees fairly and if you are a woman who earns less than a man doing the same job, you will have a good case for bringing a sexual discrimination claim before an employment tribunal.

Your level of pay must form part of your employment contract (which could be written, oral or implied by the actions of you and the employer) so reducing your pay would amount to a variation of contract which cannot be done unless you agree.

If your employers cuts your pay without your say so, this amounts to a breach of contract and you are entitled to walk out of your job and take them to employment tribunal with a claim for constructive dismissal. The tribunal could either tell the employers to reemploy you on your original level of pay and/or order them to pay compensation and damages.

If you refuse to take a pay cut your employers isn’t allowed to treat you less favourably by, e.g. putting you first in the queue for redundancy, otherwise you could sue them for unfair dismissal.

If your company is in serious financial trouble it may be in your interests to take a pay cut rather than face redundancy or even the prospect of the company closing down. You must give your agreement to the cut in writing and it’s worth trying to negotiate with your employers to ensure that your pay will go back up again if the company’s finances improve. Your employers may also be able to offer other incentives to soften the blow such as:

• Reduced hours.
• Flexible working arrangements.
• Allowing you to buy extra holiday days.
• A guarantee that if redundancy is needed, your pay-off will be based on your original pay level.

Notice pay

You generally have the right to your normal pay and benefits as set out in your contract of employment during your notice period. You may also be entitled to a minimum hour rate during your notice period for any time that you are: off sick; on holiday; temporarily laid off; on maternity/paternity/adoption leave; able to work, but your employer does not give you any work. Your pay during these periods is calculated by dividing your average week’s pay by the number of hours you usually work.

You won’t be able to claim a minimum pay rate during your notice period if you are working a notice period longer than the minimum notice period by a week or longer; or if you go on strike after giving notice.

National Minimum Wage (NMW)

Most workers in the UK are legally entitled to a minimum wage, with NMW worked out differently according to the types of work you do [Tim – good place to link here to the National Minimum wage article I wrote - Lucy]. The current NMW rates are:

• Workers aged 22+ per hour (main rate): £5.73
• Workers aged 18-21 per hour (development rate): £4.77
  The development rate may also apply to workers aged 22+ if they are receiving accredited training. There must be a written agreement between you and the employer, confirming you will attend training on at least 26 days during the first six months of employment for the training to qualify.
• Workers aged 16-17 per hour (young workers' rate): £3.53.

Exemptions

The minimum wage is not applicable if you are self-employed, a voluntary worker and or work permanently outside the UK, in the Channel Islands or the Isle of Man. Apprentices under the age of 18 are exempt from the young workers' rate, as are apprentices under 26 who are in the first 12 months of their apprenticeship.