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Is There A Penalty For Not Issuing Payslips (UK)?

June 14, 2024 Hasib Howlader Is There A Penalty For Not Issuing Payslips (UK)?

Employers in the UK have a legal obligation to provide payslips to their employees. So, is there a penalty for not issuing payslips in the UK?

These documents not only outline the breakdown of earnings and deductions but also serve as crucial records for both the employer and the employee. 

Despite this requirement, some employers might neglect to issue payslips, either due to oversight or deliberate non-compliance. 

This article explores the potential penalties for not issuing payslips in the UK, implications of withholding pay, and the broader context of unpaid wages by law.

The legal requirement for payslips

According to The Employment Rights Act 1996 every employer is mandated to provide their employees with an itemised payslip.

This payslip should be issued on or before the payday and it must include specific information such as the gross pay, net pay, any variable deductions, plus the amount and purpose of any fixed deductions. 

The requirement is designed to ensure transparency and to help employees understand how their pay is calculated and what deductions are being made.

For more information about payslips, here is the government guide to payslips and employee rights.

Penalty for not issuing payslips (UK)

Employers who fail to provide payslips are in breach of the law. Employees have the right to make a complaint to an employment tribunal if they do not receive a payslip or if the payslip does not contain the necessary information.

  • If the tribunal finds in favour of the employee, the employer can be ordered to pay compensation.
  • This compensation is typically calculated based on the unnotified deductions from the employee’s pay over a specified period.

The penalties for not issuing payslips can be significant. The employment tribunal can order the employer to compensate the affected employee for up to 13 weeks of pay, as confirmed by the CIPD HR-inform service.

This is a substantial financial penalty, especially for smaller businesses. Beyond financial repercussions, non-compliance can damage an employer’s reputation and erode trust within the workforce.

Of course, failure to issue payslips, can be symptomatic of wider issues in the business. Financial issues, leading to administration, are worrisome for both employers and employees. 

If you’d like to find out more about what happens to staff during company administration take a look at our article.

Can an employer withhold pay?

In addition to the requirement to issue payslips, employers must also adhere to the legal stipulation that they cannot withhold pay without a valid reason.

  • Withholding pay can occur due to various reasons such as administrative errors, disputes over hours worked, or financial difficulties faced by the employer.
  • However, it is generally unlawful for an employer to withhold pay without the employee’s consent or without a legitimate reason provided by law.
  • Employees who find themselves in a situation where their pay has been withheld can take action against their employer. 

Initially, they should attempt to resolve the issue internally by discussing it with their employer or the HR department. If this does not lead to a resolution, employees can make a formal complaint to an employment tribunal. 

The tribunal can then decide whether the withholding of pay was justified and order the employer to pay any unpaid wages.

If you’re an employer and struggling to pay wages, swift action is vital. To make the most of options that might help turn things around, such as a restructuring plan to avoid insolvency or simply to go through business recovery options, we strongly advise getting expert advice.

Unpaid wages

Unpaid wages refer to earnings that an employee has not received by payday.

This can include regular salary, overtime, bonuses, or any other contractual payments. 

In the UK, the law is clear that employees must be paid for the work they have completed. If an employer fails to pay wages owed, this constitutes a breach of contract.

Employees facing unpaid wages have several avenues for recourse. They can lodge a complaint with the Advisory, Conciliation and Arbitration Service (Acas), which can offer mediation support to help resolve the dispute without going to tribunal. 

If this does not succeed, the employee can then proceed to an employment tribunal. The tribunal can order the employer to pay the owed wages along with any compensation for financial losses suffered due to the delayed payment.

Unpaid wages and UK Law

UK law provides robust protections for employees regarding unpaid wages. The Employment Rights Act 1996 and subsequent legislation establish clear guidelines for the timely payment of wages.

Employers are required to pay their employees regularly and in full, as stipulated in the employment contract. Failure to do so can result in legal action and significant penalties.

In cases of salary arrears, employees have up to three months from the date the payment was due to make a claim to an employment tribunal, as Acas confirms.

It is important for employees to act promptly to ensure their rights are protected. Employers found in breach of wage payment obligations can be ordered to pay the outstanding amount plus interest. 

Additionally, persistent non-compliance can attract further scrutiny and sanctions from regulatory bodies.

Salary arrears and the implications

Salary arrears occur when an employer fails to pay an employee the full amount they are owed by the agreed payday. 

This can happen due to administrative errors, cash flow problems, or deliberate attempts to delay payment. 

Regardless of the cause, salary arrears can have serious implications for employees, including financial hardship and stress.

For employers, failing to address salary arrears promptly can lead to legal challenges and damage to the business’ reputation. 

Employees may lose trust in the management, leading to decreased morale and productivity. 

In severe cases, unresolved salary arrears can result in high staff turnover, further impacting the business’s operations.

Summary: Penalty for not issuing payslips (UK)

The obligation to issue payslips and ensure timely payment of wages is a fundamental aspect of employment law in the UK. 

  • Employers who fail to meet these obligations face significant penalties, including compensation orders from employment tribunals. 
  • Moreover, withholding pay without valid reason or delaying wage payments can lead to legal disputes and damage to the employer’s reputation.
  • Employees should be aware of their rights regarding payslips and wage payments and take action if these rights are violated. 
  • Whether it is unpaid wages, salary arrears, or the withholding of pay, UK law provides mechanisms to protect employees and ensure they receive the remuneration they are entitled to.

For employers, maintaining compliance with payslip issuance and wage payment regulations is not only a legal requirement but also a critical factor in fostering a trustworthy and productive workplace.

Hudson Weir provides insolvency advice to help your company in times of financial difficulties. Options for businesses struggling to pay back debts on time include a company voluntary arrangement (CVA).

If you’re struggling to keep on top of payslip management – or realising salary payment is becoming increasingly hard to maintain on time – please contact our expert team for advice.

ACCAThe Association of International AccountantsICAEW Authorised Training EmployerICAEW Licensed Insolvency Practitioners (UK)Insolvency Practitioners AssociationR3

Hudson Weir are an established firm of Insolvency Practitioners who specialise in business recovery and corporate financial solutions.

Hudson Weir provides industry leading, nationwide services for its clients with the intention of easing financial pressures and providing recovery strategies for struggling businesses.

Hudson Weir Ltd (Company number 09477593) is a company registered in England and Wales.

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