Pay worked out by software can go wrong in ways a worker only notices later: hours not picked up from a time-tracking tool, a bonus rule applied wrongly, or an automatic clawback for a "missed" task. In Great Britain the law on deductions from wages decides whether the employer can keep the difference. It applies to all workers, not only employees.
The short answer: an employer must not make a deduction from a worker's wages unless a statute or a relevant term of the contract requires or authorises it, or the worker agreed to it in writing beforehand (Employment Rights Act 1996, s13). Paying less than is properly due counts as a deduction. A worker can complain to an employment tribunal within six months of the payment concerned (s23).
When a deduction is lawful
A deduction is allowed only if one of these applies (s13(1)):
- a statutory provision requires or authorises it, such as income tax and National Insurance;
- a relevant provision of the contract authorises it: a written term the worker was given a copy of before the deduction, or a term whose existence and effect the employer notified to the worker in writing beforehand (s13(2));
- the worker signified their agreement or consent in writing before the deduction.
Timing matters. A contract variation or a written consent cannot authorise a deduction for conduct or an event that happened before the variation or consent (s13(5) and (6)). So a new clawback clause added after a disputed shift does not cover that shift.
Underpayment counts as a deduction
Where the total paid on a pay day is less than the wages properly payable, the shortfall is treated as a deduction (s13(3)). That covers missing hours, a dropped allowance or a wrongly applied rate. The exception is a shortfall caused by an error of any description by the employer in computing the gross amount of wages properly payable (s13(4)). Where that line falls in a given case is a question for the tribunal on the facts.
Exceptions
Section 13 does not apply to deductions to recover an overpayment of wages or expenses, made for any reason (s14(1)). It also does not apply to deductions after statutory disciplinary proceedings, amounts a public authority requires the employer to pay over, payments to third parties under arrangements the worker agreed to in writing, deductions for taking part in a strike or other industrial action, or deductions to satisfy a court or tribunal order the worker agreed in writing to have deducted (s14(2) to (6)).
Retail workers: cash shortages and stock deficiencies
For workers in retail employment, deductions for cash shortages or stock deficiencies on any pay day must not exceed one tenth of the gross wages payable that day (s18(1)). The deduction, or the first in a series, must be made within twelve months of the date the employer established the shortage or ought reasonably to have done so (s18(2) and (3)). Automated till and stock systems that flag discrepancies do not change these limits.
Making a claim
A worker can complain to an employment tribunal (s23(1)). The complaint must be presented within six months of the date of payment of the wages concerned, or of the last in a series of deductions, with an extension for Acas early conciliation and a further period where it was not reasonably practicable to claim in time (s23(2) to (4)). The six-month limit was substituted from 1 October 2026; where the matter arose before that date, check the transitional provisions. The tribunal cannot consider deductions from wages paid more than two years before the complaint, except for certain statutory payments listed in section 27(1)(b) to (j) (s23(4A) and (4B)). If the complaint succeeds, the tribunal orders repayment of the deduction and may award compensation for financial loss caused by it (s24).
Practical steps
- Employers: before software applies any automatic deduction or clawback, check it rests on a written contract term the worker already has, or on prior written consent. Do not apply new rules to past events. Reconcile time data with payroll each pay period, and show every deduction and its purpose on the payslip.
- Workers: compare each payslip with your own record of hours and tasks. Raise any shortfall in writing promptly, and keep a copy. Note the six-month limit from each payment. For what the payslip must show, see itemised pay statements; for checking the rate itself, see AI and the minimum wage.
These sections extend to England, Wales and Scotland. This page is general information on the law in Great Britain as at 1 November 2026, not legal advice.
Questions and answers
Can my employer take money from my wages?
Only if a statute or a relevant written contract term authorises it, or you agreed in writing beforehand, unless an exception such as recovering an overpayment applies (Employment Rights Act 1996, s13 and s14).
Is being underpaid an unauthorised deduction?
Generally yes: a shortfall from wages properly payable is treated as a deduction (s13(3)), except where it results from an error by the employer in computing the gross amount (s13(4)).
Can my employer recover an overpayment?
Deductions to recover an overpayment of wages or expenses are outside section 13 (s14(1)).
How long do I have to claim?
Six months from the date of payment, or the last in a series, with an extension for early conciliation. Deductions from wages paid more than two years before the claim cannot generally be considered (s23).