Wahaca has been in the press recently for threatening to deduct pay from an employee as a result of a customer leaving the restaurant without paying.  Wahaca’s position was that their policy had not been properly communicated.  Following widespread concern that workers' are having their wages reduced as a result of circumstances out of their control, Wahaca appears to have changed its policy, but what are the basic rules around making such deductions from wages?

A worker may bring a claim for “unlawful deduction from wages” if an employer makes a deduction from their pay that is not authorised by statute or the worker’s contract, and the worker has not consented.  A deduction authorised by statute would include, for example, deductions for PAYE income tax and national insurance contributions.

The prudent employer will have included a clause in contracts of employment which entitles them to make deductions from wages in certain circumstances.  The contract with such a clause must have been given to the employee before the deduction is made.

"Retail" employment

There are additional protections for workers who are in “retail” employment where deductions are to be made because of cash shortages or stock deficiencies.  Retail employment will include any work doing the following (whether or not this is regular):

  • Carrying out retail transactions directly with members of the public or with fellow workers
  • Collecting amounts payable in connection with retail transactions carried out by other persons directly with members of the public or with fellow workers or other individuals in their It

It includes, for example, cashiers and till operators.  A “retail transaction” is quite widely defined as the sale or supply of goods or the supply of services (including financial services).

The protection afforded to retail workers will apply even where the deduction is intended to reflect the amount of a shortage and will apply even where there has been dishonesty or other conduct on the part of the worker which resulted in the shortage.

So what is the additional protection for retail workers?  The amount of any deduction or deductions from a retail worker’s wages must not exceed 10% of the gross amount of the wages payable to the worker on a particular pay day.  This provides some limit to the rate of recovery of the shortage but the deduction may be made over a number of pay days provided it is within 12 months of the date when the existence of the shortage was known or ought reasonably to have been known (if earlier).  Also, the 10% limit on deductions does not apply to deductions made from a retail worker’s final pay at termination when the employer can recoup any outstanding amount.  

Deductions (or payments from) retail workers cannot be made unless the employer has properly notified the worker of the total amount owed relating to the cash shortage or deficiency and has made a written demand for payment on one of the worker’s pay days (within 12 months).