Pay and employment contracts


In this series, we delve into the XpertHR reference manual to find essential information relating to one of our features.  This month’s topic

It is an implied term of every employee’s contract of employment that the employer will pay him or her wages. In return the employee must be ready and willing to perform all of his or her duties under the contract.

There are two types of obligation to which an employee may be bound. It is a question of the terms of the individual contract whether an employee falls into the former or the latter of these two categories:



  • Most employees are required to offer their services and be ready and willing to work. If an employee of this sort is prevented from working because of circumstances beyond his or her control the employee will usually still be entitled to be paid (Beveridge v KLM UK Ltd [2000] IRLR 765 EAT)
  • Some employees are paid only for their actual service, and therefore are not entitled to be paid if they do not perform any work. If an employee refuses to work for a day or part of a day, for example through striking, the employee is not usually entitled to be paid for the hours that he or she has refused to work. The amount that the employer is entitled to deduct from the employee’s wages may be calculated by days or hours
  • If the employee’s contract specifies that he or she should be paid hourly, then the amount to be deducted should be calculated according to the hourly rate. This is the case whether the employee has refused to work for part of a day or for a full day
  • If an employee who is paid a weekly, monthly or annual salary rather than an hourly wage refuses to work for a single day, the deduction should be calculated on a daily basis. This should probably be done by dividing the annual salary by 365 rather than by the number of days for which the employee is contracted to work per year (Apportionment Act 1870, Thames Water Utilities v Reynolds [1996] IRLR 186 EAT, Taylor v East Midlands Offender Employment [2000] IRLR 760 EAT). However, the law is not certain on this point, and it may make a significant difference to the amount to be deducted. Take the example of an employee who works 260 days per year for a salary of £10,000. He strikes for one day. The employer could deduct £38.46 if the annual wage is divided by 260, or it could deduct £27.40 if the annual wage is divided by 365
  • If an employee who is paid a weekly, monthly or annual salary rather than an hourly wage refuses to work for part of a day, then strictly speaking he or she is still entitled to be paid for the whole day’s work. The employer can probably deduct a fair sum for the hours that were not worked, but it must make it absolutely clear to the employee that it has chosen to do this. Alternatively, the employer may treat the refusal to work for part of the day in the same way that it would treat a go-slow approach to work (see below)
  • An alternative to deducting wages is to deduct the amount of money that has been lost to the employer as a result of the employee’s refusal to work.

An employee or group of employees may operate on a go-slow basis as an alternative to striking. If they do so, they are breaching the terms of their contract of send them employment because they are not offering their services and presenting themselves as willing and able to work. In these circumstances the employer is faced with several options. In each case, the employer must be clear about the decision it has taken:



  • The employer may tolerate the employees’ action. If it does so it must continue to pay the employees’ full wages
  • The employer may withhold a reasonable sum proportionate to the work that has not been done. Any calculations made on this basis should be verifiable and clear
  • The employer may deduct from the employees’ wages the amount of money lost by it as a result of their action. Again, employers should ensure that the calculations on which they base this deduction are verifiable
  • If the employer makes it clear that it does not accept the work done by the employees as substantial performance of their contractual duties, it may withhold the whole of their wages and home. Any such decision must be reasonable in the circumstances
  • If the go-slow results in a major loss of productivity, then the employees will usually be in fundamental breach of contract. The employer can then accept that breach and terminate the contract of employment. Employers should exercise extreme caution if they choose to follow this course of action.

Documents

Contract of employment

Written statement of terms and conditions of employment.

Cases

Beveridge v KLM UK Ltd, [2000], IRLR 765 EAT

MacPherson v London Borough of Lambeth, [1988], IRLR 470 HL

Miles v Wakefield Metropolitan District Council, [1987], IRLR 193 HL

Wiluszynski v London Borough of Tower Hamlets, [1989], IRLR 259 CA

Action point checklist

When writing up a contract of employment:



  • Be clear about what happens when the employee is not working, for example because of sickness

If employees refuse to work:



  • For hourly paid employees, calculate deductions on the basis of the hourly rate
  • For yearly or monthly paid employees who refuse to work for a day, calculate any deduction on the basis of their annual wage divided by 365
  • For yearly or monthly paid employees who refuse to work for part of a day, be clear about the basis on which you calculate any deductions
  • For employees who operate on a go-slow, consider whether the action is serious enough to dismiss them or to send them home without pay
  • Always be clear about the reason for and basis of any deductions.

Questions and answers

Is an employer liable if it inadvertently fails to pay an employee’s wages?

Although technically, a one-off or occasional failure to pay wages is a breach of contract, it is not normally serious enough to entitle an employee to resign and claim that he or she has been constructively dismissed. However, because it is an implied term of every employee’s contract of employment that the employer pays his or her wages, an employer that persistently fails to comply with this obligation may be faced with an action in the county court for breach of contract. Alternatively an employee may bring a claim in the employment tribunal for unlawful deductions from wages under the Employment Rights Act 1996, section 23(1).

If an employee is prevented from working due to outside circumstances, is he or she still entitled to payment?

Employees must offer their services and be ready and willing to work for their wages. If they are prevented from working by their employer, in most cases they must still be paid for the hours agreed. However, in some cases the contract of employment may expressly specify the contrary, meaning that the employee is paid only for the actual service rendered and is not entitled to payment if he or she does not perform any work.

Must an employer still pay the wages of an employee who has expressly refused to perform any work?

Employees who refuse to work are not entitled to payment for the time that they do not work. This can be calculated hourly or daily, according to the terms of the individual contract of employment. Alternatively, an employer may choose to deduct the amount of money that has been lost as a result of the employee’s refusal to work. If an employee chooses to operate a go-slow instead of a strike he or she is still breaching the terms of the contract of employment, and the employer may opt to withhold a sum proportionate to the work not being done.

Comments are closed.