Did you know that the Employment Rights Act 1996 (commonly referred to as ERA) states that an employee must receive an itemised payslip (statement of pay) on, or before, the date that the payment of their wages or salary is made?

This means that if you pay your employees on 1st of each month, you must ensure they physically receive their payslip on or before that date.  And you must ensure that the figures are presented in such a way to comply with the ERA.

Required information

The ERA Section 8 Clause 2 details the itemised information which must be included on the payslip:

  • the total gross amount of the salary or wages payable
  • the amounts of any fixed and/or variable deductions from that gross amount
  • details of the purposes for the fixed and/or variable deductions
  • the net amount of wages or salary payable i.e. the actual amount the employee will receive
  • where different parts are paid in different ways, the amount and method of payment of each part-payment.

An interesting point is that whilst the ERA makes it clear that these details must be included on a payslip, it doesn’t state how much detail an employer needs to include. There is no clear requirement to ensure the employee understands the difference between their gross and net pay amounts.

Ridge v HM Land Registry

The Employment Appeal Tribunal (EAT) looked at this specific point during the case of Ridge v HM Land Registry 2014.

Mr Ridge (R) had had a long period of sick leave which had resulted in him using all of his entitlement to sick pay. On his return to work, he had further intermittent absences so his entitlement to pay varied each month depending on how many days he had worked. His payslip showed all reductions as a minus figure but with no further information explaining what they related to. The employer thought it should be obvious, but R submitted a tribunal claim alleging a failure to comply with the ERA.

Initially, the tribunal rejected his claim on a technicality – it held that the variations to R’s pay were “adjustments” and not deductions. This was due to how the employer’s pay periods were calculated. However, the EAT decided to overturn this decision and ruled that the employer had, in fact, breached the ERA rule on itemising deductions. The EAT said that this employer could have complied with its legal obligations simply by providing abbreviated words next to the minus figure which explained what the deduction was for, e.g. “REC OP” for recovery of an earlier overpayment of pay.

Explanation

This case illustrates that it is important to include an explanation even if the deduction is blatantly obvious, such as tax or NI payments.

Our HR expert advice is to make sure that whoever completes your payroll is fully aware of the ERA and that unidentified deductions on payslips aren’t permissible.

If anything in this post resonates with you or you have further questions, please don’t hesitate to give us a call. We are really open to a free, no-obligation telephone consult or an hours face to face consultation. We’re genuinely approachable and keen to use our experience to make a difference to your business.

We provide training or HR advice to ensure you are compliant with the ERA and all other HR related matters. Please call us on 01473 360160 or book a consultation.