Unlawful Deduction of Pay

We run a petrol station and as is common in the industry,  we reserve the right to deduct from our staff’s pay in respect of till shortages,  even when that is due to what is termed  ‘bilking’ i.e. when drivers  fail to pay up after filling their tanks and just drive off. We had such an incident recently and decided that the time had come to enforce our rights by deducting the cost of the lost fuel (£56.72) from their next weekly pay.

They have written to say:

“I find it hard because even if I saw someone stealing petrol, what can I do about it? I would first have to leave the till unattended and then challenge the person who won’t pay even if I managed to get to their car in time. Every time I go to work I run the risk of not getting paid and I only earn £150 per week. I think it is illegal and wrong”.

Peter replies:

This is a common problem and inevitably a controversial one with the Petrol Retailers Association stating that docking wages is acceptable under certain circumstances. Trade unions see the practice as being ‘illegal and immoral’.

The law protects individuals from having unauthorised deductions made from their wages, including complete non-payment. This protection applies both to employees and to some self-employed workers.

The deduction will be unlawful if any of the following applies:-

  • it is not required or authorised by legislation, for example, income tax or national insurance deductions;
  • it was not authorised in their contract of employment, provided the worker has been given a written copy of the relevant terms or a written explanation  of them before it is made;
  • It was not consented to by the employee in writing before it was taken.

There are some limited exceptions where a deduction will be lawful, such as if they were previously overpaid or where they’ve taken part in a strike or industrial action.

In the retail industry or in a restaurant, employers can take up to 10% of gross wages to cover any shortfall if the deduction is made because of cash shortages or stock deficiencies. Such an employer may, however, make deductions over a course of many weeks/months, as long as they don’t take more than 10% for that pay period. If the employee leaves employment, you are then allowed to deduct the full outstanding amount from their final pay.

Workers who believe they have suffered an unlawful deduction from wages can take it up with their employer informally. If this does not sort out the matter, recourse may be made to formal internal grievance procedures. If this does not resolve the issue, then a complaint to an employment tribunal may be made. The abolition of Tribunal fees will make this option much more likely.

You appear to have over-deducted (certainly more than 10%) and do not state that you have the requisite authority as detailed above. You should deal with their letter as a grievance and seek to find an amicable resolution in this case.

In future you need to properly investigate and decide if disciplinary action is more appropriate in the circumstances, and if that does not work, then apply the above processes properly. Failure to do it properly not only opens you up to legal claims but makes it more likely that staff will leave because they feel unfairly treated.


The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.