Shortfalls in tills or missing stock are a frustrating conundrum many retail employers face.
You have enough things to do than play detective. Sometimes it will be an honest mistake – the employee is handling cash, gift cards, debit and credit cards and store discount cards and transactions can go amiss. Other times they may be malicious intent behind the employee’s actions.
You will want to recover the costs, but what is the best way to do this?
Can employers make deductions from their employee’s wages for their cash shortages or stock deficiencies?
The law allows an employer to make deductions from employees’ wages. This includes where the deduction is permitted by statute, set out in the employee’s contract of employment, permissible due to the worker providing their written consent or as a result of an overpayment of wages.
This is why it’s particularly important for retail employers to ensure that their employees’ contracts of employment are drafted clearly and robustly by a HR and Employment Law expert. They should set out that in respect of any shortage or deficiency of stock or cash, the employer is entitled to deduct an amount equal to the full amount or value of the shortage or stock deficiency.
But even with this contractual provision, employers need to take care. Retail employees have extra legal protections regarding deductions of wages. If you make a deduction from their wages unlawfully, you could find yourself facing an Employment Tribunal claim. This could result in hefty financial awards and reputational damage!
What can retail employers deduct?
When you wish to make a deduction for these reasons, bear in mind the following rules:
- The deduction must be made within 12 months of finding out about the shortage or missing stock.
- You must notify the employees of the reasons for the deductions in writing.
- You cannot deduct more than 10% from the employee’s gross pay each pay period to cover any shortfalls. You are allowed to continue deducting up to this amount each pay period until the full amount has been repaid. This deduction is made on top of all the other lawful deductions that an employer can make.
- If the employee leaves, you can take the full amount owed to them in their final pay package. In this case, there is no limit on the amount that can be deducted.
How can Ellis Whittam help your retail business?
We help over 13,500 retail businesses across the country. Trusted by BIRA and Toni & Guy, we help our clients get the outcomes they want to achieve. Whether you need advice about deductions of wages, Sunday working, theft and dishonesty, misconduct, performance, absences or grievances, our legally qualified staff can give you pragmatic and commercially savvy guidance and support.
Contact us to find out how we can help.
