Itemised Pay Statement

(Employer's duty to provide)

Key points

• An employee has the right to be given by his employer, at or before the time at which any payment of wages or salary is made to him, a written itemised pay statement (section 8, Employment Rights Act 1996).
• This right extends not only to employees who are paid in cash but also to those employees whose wages or salaries are paid by cheque or by credit transfer to their bank or building society accounts.

Note

This right does not extend to merchant seaman or share fishermen, or to any employee who (under his contract of employment) ordinarily works outside Great Britain (ibid. sections 196 and 199).

Information to be included in the statement

• An itemised pay statement must include the following particulars:
1. the gross amount of the wages or salary payable to the employee on that occasion;

Note

Curiously, an itemised pay statement need not show how the employer arrived at the gross amount or what that amount comprises. However, it is unlikely that any self-respecting employee will for long tolerate a system that denies him an opportunity to challenge the accuracy of a gross figure that purports to include his (or her) overtime earnings, any bonus, commission or shift allowance payments that are his due.

2. the amount of any fixed deductions and the purposes for which they are made;

Note

Fixed deductions are those amounts specifically authorised in writing by an employee. They include contributions to a National Savings Scheme (SAYE) or sports & social club, private or company-sponsored medical plan (eg, BUPA or PPP), trade union dues, etc. The alternative to an itemised account of fixed deductions is a Standing Statement of Fixed Deductions (discussed below).

3. the amount and purposes of any variable deductions; and

Note

Variable deductions are deductions which vary from week to week or from month to month (or whatever), such as income tax (PAYE), National Insurance Contributions (NIC), contributions to an occupational pension scheme, or payments to the court under an attachment of earnings order.

4. the net amount of the wages or salary payable on that occasion.

Note

If an employer has agreed to pay part of an employee's wages or salary in cash (or by some other means) and part, perhaps, by cheque or by credit transfer to the employee's bank or building society account, the itemised pay statement must list the amounts in question and the methods by which they are paid.

Tax credits also to be recorded on the itemised pay statement

• With the coming into force on 1 March 2003 of the Working Tax Credit (Payment by Employers) Regulations 2002, employers are liable to pay Child Tax Credits and Working Tax Credits through the payroll to the nominated employee, and when as instructed to do so by the Tax Credits Office (TCO). Every such payment must be recorded as a 'tax credit' on the itemised pay statement (or payslip) issued to such employees (ibid. regulation 9(4)).

Standing statement of fixed deductions

• There will be occasions when the sheer number of fixed deductions authorised by an employee make it administratively impossible for an employer to itemise each of those deductions on a pay packet or payslip every time that employee is paid his wages or salary. To overcome that problem, the employer may (if he chooses) simply aggregate those fixed deductions on the itemised pay statement (without explaining their purpose) so long as he supplies the employee in question with a so-called Standing Statement of Fixed Deductions.
• A Standing Statement must be issued on or before the date on which an employee receives his (or her) first payslip or pay packet showing only the aggregate amount of fixed deductions from his wages or salary. The Statement becomes effective on the date of issue and is valid for 12 months. However, it must be amended and re-issued every time one or other of those fixed deductions is adjusted or stopped. An amended Statement, in its turn, is valid for 12 months, provided no other changes occur in the interim.

A refusal or failure to comply

• An employee may require a reference to be made to an employment tribunal if:
1. his (or her) employer has refused or failed to supply him with an itemised pay statement; or
2. the statement he gives does not comply with sections 8 or 9 of the 1996 Act.

The complaint or reference must be presented within three months of the alleged refusal or failure to comply or (if the employee is no longer employed) before the end of the period of three months beginning with the date on which his or her employment ended (ibid. section 11(4)).

• A conciliation officer of the Advisory, Conciliation and Arbitration Service (ACAS) will ordinarily be informed about a complaint or reference arising out of an alleged breach of an employee's rights under section 8 of the 1996 Act and will offer to mediate with a view to resolving the dispute amicably and informally. Should he fail to do so, the matter will proceed to a full tribunal hearing.
• If an employment tribunal upholds the employee's complaint, it will make a declaration to that effect and will instruct the employer to set matters to rights. If it finds that any unnotified deductions have been made from the employee's pay during the period of 13 weeks preceding the date on which the employee made his complaint (whether or not the deductions were made in breach of the employee's contract of employment), it will order the employer to pay the employee a sum not exceeding the aggregate of the unnotified deductions so made (ibid. section 12(4)). For these purposes a deduction will be treated in law as 'unnotified' (even if agreed to by the employee) unless declared on the employee's pay packet or payslip in the form of an itemised pay statement.