Deductions From Wages 2026/27: What Your Employer Can and Can't Take

The legal starting point: deductions are unlawful unless permitted

Part II of the Employment Rights Act 1996 sets out a simple default: your employer cannot deduct anything from your wages unless one of three conditions is met.

1. The deduction is required or authorised by legislation — PAYE income tax, employee National Insurance, a court-ordered attachment of earnings, or student loan repayments, for example.
2. Your written contract of employment contains a clause specifically allowing the deduction, and you were given a copy of that term (or told about it in writing) before the deduction was made.
3. You gave your prior written consent to the deduction, in writing, before the event or conduct that gave rise to it.

If none of these apply, the deduction is unlawful — full stop — regardless of how reasonable or well-intentioned the employer believes it to be. This is the framework that governs everything from a £15 shortfall in a till to a five-figure dispute over a company car written off in an accident.

Check what a deduction would actually leave you with using

before agreeing to anything — it's easy to underestimate how a deduction interacts with tax and National Insurance already taken off the same payslip.

Overpayments: the one deduction that doesn't need your consent

Recovering a genuine payroll overpayment is one of the few deductions specifically exempted from the consent requirement. If a payroll error means you were paid more than you were owed, your employer can lawfully claw the excess back from a future payslip without needing a contract clause or your written agreement.

Worked example 1 — payroll error overpayment

Marcus should have been paid £2,000 net for the month but a payroll error paid him £2,200.

The £200 recovery is lawful even without Marcus's consent, because overpayment recovery is a statutory exemption. Good practice — though not a legal requirement for smaller amounts — is for the employer to notify the employee and agree a repayment schedule, particularly where the sum is large enough to cause hardship if taken in one go.

Till shortages and stock deficiencies: the 10% retail cap

Retail workers get an extra layer of protection that other employees don't. Where a deduction relates to a cash shortage or stock deficiency and the worker is employed in retail, the employer cannot take more than 10% of the gross wages payable on any given pay day, even if the contract allows for the deduction and even if the employee agreed in writing.

Worked example 2 — till shortage within and outside the cap

Aisha works in a shop earning £1,800 gross per month. A till comes up £150 short on her shift, and her contract has a valid clause covering this.

The 10% cap resets each pay period, so a larger shortfall gets recovered gradually rather than in one lump sum — except when the worker leaves employment, at which point the employer can recover the full outstanding balance from the final payslip without the cap applying.

This cap is specific to retail employment and to cash/stock shortages; it does not apply to other categories of deduction such as recovering the cost of a training course or unreturned equipment, which are governed by ordinary contract and consent rules instead.

Uniform, equipment and minimum wage interaction

Charging staff for a uniform, tools, or equipment is only lawful with a contractual clause or prior written consent — but there's a second hurdle even when that's in place: the deduction cannot reduce a worker's effective pay below the National Minimum Wage or National Living Wage for the relevant pay reference period, except for a small number of exempted deduction types.

Worked example 3 — uniform deduction against the National Living Wage floor

Tomasz, aged 24, works 160 hours in a month at the 2026/27 National Living Wage of £12.71/hour.

Because the deduction drops Tomasz's effective hourly rate to £11.96 — below the £12.71 National Living Wage — this deduction would put the employer in breach of minimum wage law even though it might otherwise be permitted by his contract. HMRC enforcement treats this as underpayment regardless of the employer's intentions. Run your own hours and rate through

to check whether a proposed deduction would breach the floor.

What a valid deduction clause and consent actually look like

A clause that fails any of these tests is vulnerable to challenge, and an employer relying on it risks an unlawful deduction of wages claim at employment tribunal.

What to check if you think a deduction was unlawful

If money has disappeared from your payslip and you can't see a lawful basis for it, ask your employer in writing to point to the specific statutory provision, contract clause, or written consent that authorised it. Keep your payslips and any correspondence — these become the evidence if the matter progresses. Many disputes resolve at this stage once an employer realises the paperwork doesn't stack up.

If it doesn't resolve informally, the next step is an unlawful deduction of wages claim, which carries a strict three-months-less-one-day time limit from the date of the deduction (or the last deduction in a series). Use

and to establish exactly what you should have received, since a precise, well-evidenced figure makes any grievance or tribunal claim far more persuasive than an estimate.

Bottom line

Employers have real, legitimate routes to deduct from wages — overpayments, contractual clauses, and written consent all work — but the law is deliberately narrow about it. Retail workers get an extra 10% cap on cash-shortage deductions, and no deduction other than specifically exempted ones can push your pay below the National Living Wage. If a deduction doesn't fit cleanly into statute, contract, or prior written consent, it's worth questioning before you accept it as final.