When HMLR paid Mr Ridge at the end of each month he received a payslip which stated his gross pay and listed any specified deductions separately. Following a period of ill health Mr Ridge had exhausted his entitlement to full sick pay. When he continued to be absent his payslip was affected as follows:
- When HMLR processed the absence before the end of the month, the figure for his gross pay was lowered to reflect the absence for that month;
- When the absence was not processed until the following month, ‘minus’ entries were made under his gross pay to reflect the fact that he had been overpaid the previous month.
Mr Ridge complained that these were in fact deductions and that his payslips should include an explanation for such deductions. HMLR explained the purpose of the deductions to Mr Ridge but did not amend the form of the payslip.
Mr Ridge issued proceedings in the Employment Tribunal to the effect that HMLR had failed to comply with its obligation under section 8 of the Employments Rights Act 1996, by not correctly itemising deductions from salary on his payslip. The Tribunal held that the payslips complied with HMLR’s obligations under the Employment Rights Act and the variations were not deductions from salary but adjustments to Mr Ridge’s gross pay.
The EAT overturned this decision and found that where an employer was recovering money for overpayments from a previous month, these should be considered to be deductions from salary for the purposes of section 8 and that the amount and purpose of the deduction should therefore be identified in the employees payslip. The Judge went on to say that this fit with the purpose of the statute, “to promote clarity and enable an employee to see in broad outline how his wages and salary are made up.”
This case highlights the importance of correctly itemising payslips. Where an employer seeks to recover an overpayment it should be correctly identified in the payslip, even where the employee is aware of the deduction and the reason for it.
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