Understanding Your Rights: The Complete Guide to Unpaid Wages and Pay Claims

Being underpaid or not paid at all for your work is more common than you might think. Whether it's unpaid wages, missing holiday pay, withheld bonuses, or incorrect deductions, you have strong legal rights to recover what you're owed.

Employment tribunals can order employers to pay up to £25,000 in unpaid wages (with unlimited amounts available through county courts). This guide explains your rights, common pay issues, and how to recover your money.

Your Right to Be Paid

Your legal right to payment comes from:

Your Employment Contract - The agreed terms of your pay
National Minimum Wage Act 1998 - Minimum hourly rates
Employment Rights Act 1996 - Protection from unlawful deductions
Working Time Regulations 1998 - Holiday pay entitlement

Common Pay Issues

1. Unpaid Wages or Salary

The Issue: Your employer hasn't paid your wages, has paid you late repeatedly, or has paid less than contractually agreed.

Your Rights:

• You must be paid at least National Minimum Wage (£11.44/hour for 21+, as of April 2024)
• Payment must be made on the agreed date
• You're entitled to the full amount specified in your contract

Example: You're contracted for £35,000 per year but your employer only pays £30,000, citing "company difficulties." This is an unlawful deduction - they must pay what's contracted or formally vary your contract with your agreement.

Time Limit: Claims must be brought within 3 months of the deduction (or last in a series of deductions).

2. Unpaid Holiday Pay

The Issue: Your employer hasn't paid you for holidays taken, has refused holiday requests unreasonably, or hasn't paid you for accrued but untaken holiday when you left.

Your Rights:

• Statutory minimum: 5.6 weeks per year (28 days for full-time workers)
• Holiday pay must be at your normal rate (including regular overtime and commission)
• Accrued holiday must be paid on termination
• You can carry over up to 4 weeks if you were unable to take it due to sickness

How to Calculate:

• Full-time (5 days/week): 28 days per year
• Part-time: Pro-rata (e.g., 3 days/week = 16.8 days)
• Irregular hours: Calculate based on average over previous 52 weeks

Case Law: Harpur Trust v Brazel [2022] confirmed that part-year workers are entitled to 5.6 weeks' holiday, not pro-rated by weeks worked.

Example: You're a term-time only worker who works 10 weeks on, 2 weeks off. Your employer tries to pro-rate your holiday to account for weeks not worked. This is unlawful - you're entitled to the full 5.6 weeks.

What it's worth:

• Weekly pay × untaken weeks
• Average weekly earnings include regular overtime and commission
• Example: £600/week × 2 weeks untaken = £1,200

3. Unpaid Overtime

The Issue: You've worked overtime but haven't been paid, or you're paid less than the agreed overtime rate.

Your Rights:

• If your contract specifies overtime pay, you must receive it
• Even without specific terms, you must be paid at least National Minimum Wage for all hours worked
• Some contracts include overtime in salary (check yours carefully)

National Minimum Wage Test:Total pay ÷ total hours worked must equal at least minimum wage

Example: You're salaried at £22,000 (£423/week) and contracted for 37.5 hours/week. You regularly work 50 hours. Your effective hourly rate is £8.46 - below minimum wage of £11.44. Your employer must pay the difference.

What it's worth:

• Agreed overtime rate × unpaid hours
• Or minimum wage shortfall × hours

4. Unpaid Bonuses and Commission

The Issue: Your employer hasn't paid bonuses or commission you've earned according to your contract or established practice.

Your Rights:

• Contractual bonuses must be paid if you've met the criteria
• Commission must be calculated and paid according to your agreement
• Discretionary bonuses may still be payable if there's an established practice

Key Questions:

• Is the bonus contractual or discretionary?
• What are the qualifying criteria?
• Have you met those criteria?
• Is there an established practice of payment?

Case Law: Horkulak v Cantor Fitzgerald [2004] established that even discretionary bonuses can't be withheld irrationally or capriciously if there's a contractual framework.

Example: Your contract states you'll receive a bonus "at the company's discretion, based on performance." You've exceeded all targets but are told "there's no budget." If similarly-performing colleagues received bonuses, you likely have a claim.

What it's worth:

• Contractual amount clearly stated
• Or evidence-based calculation of what you should have received

5. Unlawful Deductions from Wages

The Issue: Your employer has deducted money from your pay without your agreement or legal authority.

Legal Deductions (allowed without consent):

• Tax and National Insurance
• Court orders (e.g., child maintenance)
• Statutory deductions (e.g., student loan repayments)
• Deductions required by your contract that you've agreed to

Unlawful Deductions (require consent or contractual authority):

• Till shortages or cash discrepancies
• Damage to company property
• Cost of training or equipment
• Season ticket loans (without agreement)
• Overpayment recovery (without proper notification)

Example: You're a retail worker. Your till is £50 short and your employer deducts this from your wage without your agreement. This is unlawful unless your contract specifically allows it AND you've agreed in writing.

What it's worth: The full amount unlawfully deducted

6. Notice Pay (Payment in Lieu of Notice)

The Issue: Your employer dismissed you without notice and didn't pay you in lieu of notice.

Your Rights:

• Statutory minimum notice:
  • 1 week if employed 1 month-2 years
  • 1 week per year if employed 2-12 years (max 12 weeks)
  • Whatever your contract says if more generous
• If dismissed without notice and not for gross misconduct, you're entitled to notice pay

Example: You've worked for 5 years and your contract gives 8 weeks' notice. You're dismissed immediately without cause. You're entitled to 8 weeks' pay (contractual notice is longer than statutory 5 weeks).

What it's worth:

• Weekly gross pay × notice weeks
• Example: £650/week × 8 weeks = £5,200

7. Incorrect Tax Deductions

The Issue: Your employer has deducted too much (or too little) tax or National Insurance.

What to Do:

• Check your payslip and tax code
• Contact HMRC if your tax code is wrong
• Your employer must use the tax code HMRC provides
• You can claim refunds directly from HMRC

Note: This isn't usually an employment tribunal matter - deal directly with HMRC.

How to Calculate What You're Owed

Step 1: Gather Your Documents

• ✓ Employment contract
• ✓ Payslips for the relevant period
• ✓ Bank statements showing payments received
• ✓ Timesheets or records of hours worked
• ✓ Emails about pay, bonuses, or deductions
• ✓ Company policies on overtime, bonuses, or deductions

Step 2: Calculate the Shortfall

For Wages:Contracted amount - Amount received = Shortfall

For Holiday Pay:(Weekly pay × 52) ÷ 12 = Monthly payUntaken holiday weeks × weekly pay = Holiday pay owed

For Overtime:Overtime hours × overtime rate = Overtime owed

For Bonuses:Contractual formula or comparator evidence = Bonus owed

Step 3: Add Interest

You may be entitled to interest on late payments at 8% per year from the date payment was due.

Example Calculation:

• Unpaid wages: £2,500 (1 month's salary)
• Unpaid holiday pay: £1,200 (2 weeks)
• Unpaid overtime: £800 (40 hours at £20/hour)
• Total owed: £4,500
• Interest (6 months at 8%): £180
• Total claim: £4,680

The Law: Protection from Unlawful Deductions

Section 13, Employment Rights Act 1996

An employer can only make deductions from wages if:

1. Required or authorized by statute (tax, NI, court orders)

2. Required or authorized by your contract (pension contributions you've agreed to)

3. You've given prior written consent (specific consent for that deduction)

Important: A general clause in your contract saying "we can deduct money for any reason" is not sufficient. The contract must specify the circumstances and you must have agreed to it.

What Counts as "Wages"?

Wages includes:

• Salary or hourly pay
• Commission and bonuses
• Statutory sick pay
• Statutory maternity/paternity pay
• Guarantee payments
• Holiday pay
• Protective awards

Wages does NOT include:

• Pension payments by employer
• Redundancy payments
• Benefits in kind (company car, etc.)
• Advances of wages or loans

Taking Action: Step-by-Step

Step 1: Raise It Informally

• Speak to your manager or HR
• Explain what you believe you're owed and why
• Provide your calculations
• Request correction in the next pay cycle
• Keep notes of conversations

Step 2: Put It in Writing

If informal discussion doesn't work:

Subject: Unlawful Deduction from Wages / Unpaid [Wages/Holiday/Overtime]

Dear [Manager/HR],

I am writing to formally raise an issue regarding unpaid [wages/holiday pay/overtime/etc].

According to my records, I am owed:

• Total: £XXX

[Provide brief explanation and reference contract/timesheets/evidence]

I would appreciate this being rectified in my next pay cycle. Please confirm receipt of this email and when I can expect payment.

If this matter is not resolved, I will have no option but to raise a formal grievance and consider legal action.

Yours sincerely,[Your name]

Step 3: Submit a Formal Grievance

If written request is ignored:

• Follow your company's grievance procedure
• Detail what you're owed with evidence
• Reference breach of contract and Employment Rights Act
• Request meeting to discuss
• Keep copies of everything

Step 4: Consider Your Options

Option A: Stay in Employment

• Pursue grievance to conclusion
• Prepare tribunal claim if not resolved
• Continue working (tribunal protects you from victimization)

Option B: Resign and Claim

• If substantial amounts owed, consider resignation
• May strengthen your position
• Allows you to focus on claim
• Consider constructive dismissal if employer's breach is fundamental

Step 5: Start ACAS Early Conciliation

• Must be within 3 months minus one day of the deduction (or last in a series)
• ACAS will attempt to negotiate settlement
• Doesn't cost anything
• Extends your tribunal deadline
• Can settle without tribunal if employer agrees

Step 6: Submit Employment Tribunal Claim

If ACAS doesn't resolve it:

• Complete ET1 claim form
• Detail all amounts owed with evidence
• Include interest calculations
• Tribunal can order payment up to £25,000
• Claims over £25,000 go to county court

Limits and Restrictions

Employment Tribunal Limit

• Maximum £25,000 per claim for unlawful deductions
• Each payslip deduction can be a separate claim
• Multiple claims can be brought together

County Court

• Unlimited jurisdiction for breach of contract claims
• More complex and potentially more expensive
• Consider legal costs carefully
• Usually for high-value claims

Time Limits

• 3 months minus one day from deduction (or last in series)
• Series of deductions: Time runs from the last one
• Once you break the series (e.g., by resigning), time runs from that point
• Missing deadline usually means losing your right to claim

What Compensation Can You Get?

The Amount You're Owed

Full recovery of unpaid amounts (up to tribunal limits)

Interest

8% per year from date payment was due (tribunal discretion)

Aggravated Damages

Additional compensation if employer acted particularly badly (rare in pay cases)

Injury to Feelings

Only if discrimination also involved (not for simple non-payment)

Example Awards:

• Unpaid wages claim: £8,500 wages + £340 interest = £8,840
• Holiday pay on termination: £3,200
• Unpaid commission: £15,000 + £1,200 interest = £16,200

Protecting Yourself While Employed

If you raise a pay claim:

• You're protected from detriment or dismissal for asserting a statutory right
• Dismissal for this reason is automatically unfair (no 2-year qualifying period)
• You can bring victimization claims if treated badly for complaining

Document everything:

• Keep records of hours worked
• Save all payslips and contracts
• Note verbal agreements about pay
• Screenshot systems showing your work (if relevant)

Special Situations

If Your Employer Goes Bust

• Claim through the Insolvency Service
• National Insurance Fund may pay:
  • Up to 8 weeks' unpaid wages (capped at £571/week)
  • Unpaid holiday pay
  • Notice pay
  • Redundancy pay
• Limits apply but you don't lose your rights

If You're Still Employed

• You can claim for past deductions while still working
• Employer can't dismiss or penalize you for claiming
• Such treatment would be automatically unfair dismissal
• Consider impact on working relationship vs. amount owed

If You've Left Employment

• Must claim within 3 months of your last day
• Include all outstanding amounts (wages, holiday, notice)
• Easier to pursue claim without employment relationship concerns

How Unfair Dismissal UK Can Help

Pay disputes can be straightforward or complex. We provide:

✓ Quick case assessment - Know what you're owed within 24 hours
✓ Letter before action - Formal demand often resolves issues
✓ ACAS negotiation support - Maximize settlement offers
✓ Fixed-fee representation - Clear pricing for tribunal claims
✓ Fast resolution - Pay claims are often resolved quickly
✓ No win, no fee - Available for claims over £10,000

Average recovery for clients: £8,500 in unpaid wages and holiday pay

Not being paid what you're owed?
Don't let your employer get away with it. Get expert legal advice and recover your money quickly.

Calculate What You're Owed: Free Claim Calculator

Speak to an Expert:
📞 Call: 0330 043 3008
💬 WhatsApp: +44 7418 641 785
📧 Email: office@unfair-dismissal.uk

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