Legal Article - Employment Law

The Employment Rights Act within Retail Employment

Special rules apply to workers in retail employment in respect of deductions or payments to employers because of cash shortages or stock deficiencies. Such deductions or payments must comply with both the general rules set out previously and the following additional rules.

A person works in retail employment if their work involves selling or supplying goods or services directly to members of the public, fellow workers or other individuals in their personal capacities, or in collecting money in connection with the sale or supply of such goods or services.

Workers covered include:

• Those who do not regularly undertake selling activities to the public or fellow workers but do so on odd occasions;
• those who collect or receive money in connection with retail transactions with the public or fellow workers but are not themselves involved in the sale or supply of goods or services. Rent collectors and cashiers who do not service customers are examples.

Retail employment does not include those who only sell or supply goods or services to companies, such as van drivers or parts personnel who only supply goods to other depots or other companies.

If an employer operates a bonus scheme under which workers are paid a bonus if there is no loss of stock or cash or a loss that falls short of a certain allowable level. Failure to pay this bonus is treated as a deduction due to a cash shortage or stock deficiency. The special protections set out below therefore apply.

In addition, deductions made or payments received because of dishonesty or other conduct which results in a shortage are to be treated as deductions or payments because of a shortage and are covered by the special protections. It does not matter whether the amount of the deduction or payment is equal to the value of the shortage.

It is unlawful for an employer to deduct more than 10 percent of the employee’s gross wages. This limit does not apply to deductions from the final payment of wages.

Any deduction from the wages of a retail worker because of a shortage is entirely unlawful if made more than 12 months after the employer established the shortage, or ought reasonably to have done so.
This is not the case, however, if the deduction is one in a series resulting from a particular shortage and the first deduction is made less than 12 months after the shortage was (or ought reasonably to have been) established.
Any payment received by an employer from a worker in retail employment because of a shortage is only lawful if certain conditions are met. These conditions are:

• that the employer must, before receiving the first payment for any particular shortage, let the worker know in writing of the full amount which he owes for the shortage;

• That the employer must have a written demand for payment on one of the worker’s pay days;

• that a demand for payment (or the first in a series of demands) relating to a particular shortage must not be made earlier than the first pay day after the day on which the employer informed the worker of the full amount owed (or, if the worker is informed on a pay day, that day). Likewise it must not be made more than 12 months after the shortage was (or ought reasonably to have been) established;

• that any such demand must not require the worker to pay more than 10 percent of the gross amount of income payable to the worker on the pay day; and
• that the payment (or payments) demanded on a pay day, added to any deductions made on the pay day because of shortages, must not exceed 10 percent of the gross amount of wages payable to the worker.

A demand for payment can be made by being given to or posted to the worker, or left at his last known address, on a pay day. If the pay day is not a working day of the employer’s business, the demand must be made on the first working day following the pay day.
If an employer goes to the courts to recover money which he has asked a retail worker to pay him because of shortages, but which the worker has not paid, the court must make sure that payments does not exceed instalments of 10 percent of gross wages.

This does not, however, apply to any amount paid by the worker from his final payment of wages or sums paid by him once he is no longer working for the employer.
The limit on deductions for shortages to 10 percent of gross wages does not apply to the worker’s final payment of wages. This means either the wages due a worker under his contract for his final period of employment or, if paid later, a payment made in lieu of notice.
Correspondingly, any payment made by the worker to the employer on or after the day the final payment of wages is made is not subject to the 10 percent limit.

National Minimum Wage (NMW)

The National Minimum Wage (NMW) was developed to ensure employers pay their employees fairly depending on their age and the type of work they undertake.
The NMW is constantly being updated to fall in line with the economy to ensure workers are making enough money to live. The most recent changes to the NMW will occur in October 2011.
As from 1st October 2011, workers aged between 16 and 17 are entitled to £3.68 per hour minimum, between 18 and 20 employees are entitled to £4.98 per hour and for those aged 21 and over, they are entitled to £6.08 per hour.
Workers are people employed under a contract of employment, or who do work personally for someone else. For example home workers, agency workers, casual labourers, freelancers. Genuinely self employed people are not entitled to National Minimum Wage.

Apprentices, including Modern Apprenticeships, and other employed trainees on National Traineeships, Skill seekers and Job Skills traineeships aged under 19 are only entitled to £2.60 per hour according to the NMW guidelines. If a trainee is aged over 19 but they are still within their first year of the apprenticeship then they too are only entitled to £2.60 per hour.    

What is National Minimum Wage pay?
The starting point is the gross pay including the following:

• Incentive pay
• Bonuses
• Tips paid through the payroll
• Income tax and employees national insurance contributions
• Deduction or payment of a penalty
• Deduction or payment to repay a loan
• Deduction or payment to repay an advance of wages
• Deduction or payment to pay for purchase of shares/securities
• Deduction or payment to refund accidental overpayment of wages
• Union subscriptions
• Worker’s pension contribution
• Any deduction made by the employer but not for his/her use or benefit
• Unforced payments by the worker for goods and services from the employer
• Accommodation up to the limit, maximum offset is, as of October 2011, £33.11 per week (£4.73 perday.) 
Items that do not count as NMW are:

• A loan
• An advance of wages
• A pension payment
• A lump sum on retirement
• A redundancy payment
• A reward under a staff suggestion scheme
• Overtime and shift premier
• Allowances that are not consolidated into pay
• Expenses
• Refund of money spent on work
• Deduction or payment for tools, uniforms etc.
• Deduction or payment for the employer’s own use or benefit
• Payments by the worker to another person connected with the job
• Accommodation above the limit of £26.25 per week (£3.75 per day) (from 01 October 2004)
• benefits in kind e.g. meals, luncheon vouchers, fuel, car, medical insurance, assistance with removals, employer’s contribution to worker’s pension fund.


Published: 26 May 2011


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