Payroll Deduction

Payroll Deduction

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We have an employee who ordered an item through the company and was going to pay us back in cash for it.

The employee has since left the company without paying for the item.

We are processing the pay for his last week at the moment and want to do a deduction for this amount.

Should the deduction of x pounds be in the gross pay or the net pay - i would imagine the deduction should be enough so the employees net pay decreases by x pounds.

Thanks.

Replies (2)

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By johngroganjga
18th Mar 2014 10:33

It's a deduction from his net pay.  It's nothing to do with his tax / NI liability.

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Stepurhan
By stepurhan
18th Mar 2014 10:45

Agreed deduction?

Technically, unless the employee has agreed to the deduction, you cannot make it at all. You are only allowed to make deductions from employee wages where statutory (PAYE and NIC), contractual or agreed by the employee in writing.

I am assuming that the amounts are such that no-one is likely to kick up a legal fuss about it anyway. However, if the employee parted on bad terms, beyond not paying for this item, then they could just do it out of spite.

Since the employee owes you for the item, and you are unlikely to get paid any other way, it is probably still worth doing. Just best to go into it knowing the (hopefully remote) legal risk.

As john said, you would make the deduction from the net pay, because the arrangement was to pay you back from the net pay. Deducting it from gross pay would leave them better off by any tax or NIC saved, effectively leaving you bearing part of the cost.

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