part ONE: ‘You owe me!’

Adam Bernstein examines the pitfalls of making deductions from employee wages

Published:  20 March, 2019

As an employer, have you ever found yourself in a situation where you need to make a deduction from an employee’s wages? Are you confident that you know the legal rules in this area? Andrew Rayment, a Partner in the employment department of law firm Walker Morris, has seen this question arise many times with employers who have made the wrong decision.
    
He offers an example to illustrate the point. A worker has had to take three weeks off work because of a bad back. He is paid statutory sick pay but there is no company sick pay scheme to top this up. He has three young children to support and the employer knew he was going to struggle to make ends meet. The employer ‘topped him up’ to his full wages for the three weeks as a ‘loan’ to help him out. It was agreed, however, that the loan was to be repaid when the worker was in a better situation. The payment was through payroll so the money was received as ‘wages’.
  
 “The problem in this case was that everything was done on trust, so nothing was written down or confirmed in writing,” and as Andrew continued, “a year later the worker resigned after a disagreement. During the interregnum, the period between handing in his notice and his departure, he didn’t repay the money, so it was simply deducted from his final wages payment.” The agreement for the loan was verbal and there was nothing written into his employment contract for the employer to make deductions from his wages.
    
As if to inflame the situation, the worker subsequently filed a claim in the Employment Tribunal for unlawful deductions from wages and the employer was ordered to repay the sums deducted.
    
As Andrew says: “It seems unjust, but these were the actual facts of an Employment Tribunal case. But there is a further sting in the tail. Once an Employment Tribunal has ordered an employer to pay back an amount that has been deducted unlawfully the employer cannot attempt to recover that money later in another way, for example by bringing a civil action in the county court.” This rule, he adds, applies even though the sum may have been properly due from the employee to the employer. The fact that the employer has sought to recover it unlawfully effectively extinguishes the previous debt and the employer does not get a second bite at the cherry.

What does the law say?
Section 13 of the Employment Rights Act 1996 sets out the provisions that protect workers from unauthorised deductions (known as unlawful deductions) being made from their wages.
  
 “Quite simply,” says Andrew, “the law says it is unlawful for an employer to make a deduction from a worker's wages unless the deduction is required or authorised by statute or a provision in the worker's contract; or the worker has given their prior written consent to the deduction.”
    
Worse still for employers, he says that unlike breach of contract claims which can only be brought after the employment has ended, employees can bring unlawful deductions claims in the Employment Tribunal while their employment is ongoing.

Who is protected?
The law applies to all workers and includes not only an employee, but an individual who has entered into ‘any other contract... to do or perform personally any work or services’, unless the individual is carrying on a ‘profession or business undertaking’ and the other party to the contract is ‘a client or customer’ of that undertaking. In practice, anyone who is on the payroll regardless of whether they are full-time, part-time, casual, direct agency hire or zero-hours will be protected.
    
Andrew cautions employers that following a raft of recent cases on worker status many self-employed contractors may be deemed in law to be workers regardless of the parties’ intentions or the contractual paperwork.
    
In essence, workers are protected from having deductions made from their wages except in certain specific circumstances. Says Andrew: “The law puts the onus firmly on employers to obtain authorisation from the worker to any deductions before they are made. The overriding aim is to protect staff from unscrupulous employers, but employers also need to protect themselves against falling victim to the strict legal rules.”



Related Articles

  • Part ONE: Employers in the firing line  

    Before July 2013 individuals were free to bring Employment Tribunal claims. However, in July 2013 the government introduced Employment Tribunal fees for anyone wanting to make a claim or appeal a judgment.

    The fee to lodge a claim was £160 or £250 (dependent upon the nature of the claim) and the fee to pursue the matter to a final hearing was a further £230 or £950 (again dependent upon the nature of the claim). If employees won their claim, the tribunal judge could order the employer to pay any fees incurred.

    According to Chloe Themistocleous, an associate at Eversheds Sutherland (International) LLP, after the introduction of tribunal fees the number of claims being brought fell by 80%, but the ratio of claims being successful did not change and so the introduction of fees did little to deter spurious claims. “Clearly,” says Chloe, “some individuals were deterred from making claims due to the cost. Whilst a remission system was in place to help the poorest people, by reducing or waiving the fees, those who missed out on a remission had no choice but to pay the fees or not make a claim; many simply did not want to take the risk.”

    Supreme Court decision
    It appears that while claim numbers were dropping, unrest in trade unions was growing and so Unison decided to challenge the government’s implementation of the fee regime, claiming not only that it was unlawful but that it indirectly discriminated against women.

    Chloe says this was not by any means an easy task as both the High Court and Court of Appeal rejected the claim. “However, at the end of July 2017, the Supreme Court quashed the tribunal fee regime giving judgment that it was both unlawful and indirectly discriminatory.” Effectively the Supreme Court decided that the government acted outside its powers when it introduced fees at current levels, because the fees effectively prevent access to justice.

    What does this mean?
    The ruling means a number of things. Chloe explains: “As a result of the judgment no further fees can be charged by the Employment Tribunal until a replacement scheme is introduced.” This means new claims can now be brought for free again and no hearing fees will be charged claims already lodged.

    She adds that as for those who have already paid tribunal fees, the Ministry of Justice has undertaken to reimburse fees already paid.

    Of course, without the deterrent effect of fees, employers now face an increased risk of employment-related claims from current and former staff. Worryingly, Chloe says it is also possible that some individuals might now try to claim they should be permitted to bring out-of-time claims in respect of past alleged breaches of their rights, “arguing that the now found to be high and unlawful
    fees prevented them from bringing a claim.”

    When a replacement system will be debated and passed by parliament is unknown - it could be months or even longer. The Supreme Court ruling gives parliament a lot of ‘food for thought’, but so far, it is unclear
    what shape a replacement scheme would take.

    As Chloe sees it, while there is a window of opportunity to submit a claim without paying a fee, it is likely that employees will take it. “Claim numbers are expected to rise, but whether they will rise to the levels they were at prior to the introduction of tribunal fees is unknown. If they do, it is unlikely that the current tribunal system, with a reduced number of hearing centres, judges and clerks, could cope.”

    With time, if a new fees regime is introduced and once the media attention has died down, the number of claims will level, but, in the meantime, employers must watch and wait.



     

  • Get to the essentials 

    Marketing can be hard to grasp, even for the most experienced business operator. This made it an ideal topic for Andy Savva to cover as part of his 2019 training course schedule. Andy's one-day Marketing Essentials course provides an overview of what marketing actually is, looks at key approaches and how to apply them to a garage business.
        
    Aftermarket sat in on a sold-out session held in Crawley in February. In front of a packed room, filled with garages owners and staff, Andy dispelled some myths and misconceptions surrounding the discipline: "Marketing is one of the most misunderstood functions found in business. Whatever the reasons for any negative image that marketing may have, it is essential to realise that marketing is vital to ensure the survival and growth of any business. Marketing cannot be ignored and needs to be a part of the culture of any successful organisation.
        
    "Marketing affects everyone. We are all consumers. Most businesses depend on marketing to provide an understanding of the marketplace, to ensure their products and services satisfy the needs of customers, and that they are competing effectively."
        
    Despite running great businesses, Andy has found that garage owners often struggle when it comes to marketing: "Understanding customers and anticipating their requirements is a core theme of effective marketing, yet this is somewhat difficult for garages to fully get to grips with. So too is understanding general market trends and developments that may affect both customers views and the activities of businesses in the aftermarket repair sector. You must also be aware that a business does not have the marketplace to itself. There are always direct competitors, new entrants and indirect challengers.”
        
    Andy added: "Marketing should concern everybody in a business as it sets the context in which sales can take place. Whatever your role, you play a part in setting that context."

    Interaction
    As Andy got into the meat of the marketing matter, he led the delegates through what marketing is, and how they need to approach it and enact effective marketing within their businesses. Even the most experienced business owners and managers can get a little confused when asked to distinguish between marketing, advertising and sales. After asking attendees to pick where they would plant the marketing flag, with a few near misses along the way, Andy went through the specifics:
        
    "Marketing is a systematic approach aimed at bringing buyers and sellers together for the benefit of both. Many people confuse selling and advertising with marketing but they are not the same. Marketing is about promoting goods and services that both satisfy customers and also bring profits to the business.
         
    "Selling is the interaction that takes place on a personal level with potential customers. Marketing on the other hand is aimed at generating those potential customers in the first place. Many people confuse selling and advertising with marketing but they are not the same. Advertising is part of the marketing function, but never the other way around."
        
    For marketing to succeed, there needs to  be a goal and a way of achieving it, which Andy went on to cover: "Any marketing campaign needs to have a clear focus and this is why it is so important to make the right choices. Will the business compete across the entire market, or only certain parts? It is also a good idea to ensure all employees know the strategies being adopted, so that everyone works together to achieve the same goals." Andy then asked a question of the group: "Do you know what your garage business is trying to achieve and how it is trying to achieve it? In most cases the answer is no."
        
    The goal influences the method, and vice versa. From this point, Andy covered the classic four Ps of marketing – product, price, place and promotion – and went from there to the more recent extended marketing mix, incorporating people, process and physical evidence. Beyond this he laid out transactional marketing, which is sales-focused, and relationship marketing, which takes a much broader view including customer service, and quality presentation and results.
        
    Next he took on the thorny issue of branding as part of the marketing strategy, and why a strong brand is so important for recognition, financial value, motivation and loyalty. All of that was just the pre-lunch session. After lunch, Andy went into even greater detail on areas such as the marketing triangle, SMART objectives and SWOT analysis. It's heady stuff, but Andy made it approachable and applicable to the sector.

    Inspirational
    Those in attendance found a lot to take away from the day. Dani Comber from Thrussington Garage in East Goscote, near Leicester said: "I find Andy really inspirational. I think he's brilliant. He can come and work at our garage." Commenting on what she was learning about marketing from the day, Dani said it showed the gap between what they were doing at present, and what they should be doing: "I find it demotivating and motivating at the same time. You want to do everything, you've got the intention to do it, but you've not done it. On the other hand you are motivated because you see what you can do."
        
    Elisa Bramall from Scantec Automotive from Hailsham, East Sussex said: "I have attended several training courses with Andy. I only have good things to say about him of course. His passion being the main thing, and that he says it how it is. No beating around the bush. A lot of his values we stand by as well, i.e use of OE parts, tools and genuine equipment. When you attend his training courses, it aligns with what we want to achieve. With all of his experience, if you think you know it all you certainly don't."
        
    Tina Drayson, Operations Manager at CCM Garage, based in West Sussex and Surrey said: "I have done Andy's financial course before. It is phenomenal. I have learned so much from it. It has certainly changed the way we are doing our business. I am hoping that today with the marketing essentials will give us even more direction going forward."
        
    Terry Roberts, owner at  Witham Motor Company in Witham, Essex said: "I have just become a RAC approved garage in the last few weeks, so I am looking at changing my brand. I am really enjoying it. I am learning a lot and have picked up a lot of things."
        
    Commenting on what he was getting from the course, Billy from  Beacon Hill Garage in Hindhead, Surrey said: "It just hammers home that if your standards slip, and your marketing as well, and you take your eye off the ball, things will go wrong. I will be going back to give a few people a kick up the backside to bring standards back up. "
        
    Brothers Mahesh Vekaria and Pravin Patel own a garage each in Harrow. Mahesh, owner of Cardoc said: "What have I learned from Andy today so far? It has refocused and re-energised my enthusiasm for marketing. We do a fair bit of marketing, but coming today, you see a different angle to it."
        
    Pravin, proprietor at Harrow Service Centre, observed: "Today has been interesting. I have learned a lot. In a sense we already do a bit of marketing, but to understand what it really does mean and the ways we are doing it – is it right or wrong? – is really useful. It is something to implement when we go back to work."
        
    In that the pair are brothers and are based just half a mile apart, Aftermarket was curious as to who would get back and implement new marketing initiatives first. "I would say that I would," said Mahesh. Pravin agreed: "Yes  he would, definitely, having said that, he looks after my marketing for my garage as well. So he has double the work really."

    Information
    Edward Cockhill of Uckfield Motor Services in Uckfield East Sussex observed: "It is quite an eye-opener. I saw marketing as just advertising, whereas it is really the whole perception of my company. There is a lot of cogs that are going to be turning when I get home. "
        
    Peter Bedford of GT One Ltd in Chertsey, Surrey said: "We are an independent Porsche specialist. Our business is in need of a bit of a review in its marketing ideas, and we are looking to freshen it up. I have come along to see another angle of it. Some things I think I know and we have applied. Some I know and we have not applied, so you need a kick up the backside. Some things are brand new. On the whole it is brilliant."
        
    Cieran Larkin from Larkin Automotive in Dublin commented: "It is good to get marketing training from a professional who has been in the garage business as opposed to someone who is dealing with generic marketing. Andy's experience is brilliant in that way."
        
    Nick Robinson from Marchwoods in Folkestone had been to Andy's courses previously and was back for more: "I came to Andy's events last year for garage financial understanding and customer excellence. They were real eye-openers so I have come back for another one. I was badgering him earlier to see what is coming up next. I will be at that one as well!"
        
    Meanwhile, for Edward from Swanley Garage in Swanley, it was his first time: "This is the first one I have been to. It is really good. It is about getting all the information and having the guts to go out and do it. We are all guilty of not doing marketing properly, it is about taking that jump to rebrand yourself or say right we are not doing that any more, or we are not doing cut price work, or we are not going to let the customers bargain with us any more, and seeing where it takes you."

  • Would you like to diagnose more vehicles first time? 

    As we reach March, 2019 is well and truly underway. In fact by the time you read this one third of the year will have whizzed by never to be seen again. Now, I’m not one for New Year’s Resolutions (they’re so last year), but I am the type of chap that likes constant progress when it comes to developing a technician’s career.
        
    There’s so much to be said for small steps taken everyday that on first look appear don’t appear to make a difference, but when gazed back upon over a 12 month period have a staggering affect on your capability to diagnose a vehicle first time, in a timely manner.

    Pitter-patter of tiny feet
    Small steps are all well and good but where do you start? After all, you don’t know what you don’t know, and you’d like to start your journey to diagnostic success off on the right foot. In this instance I’d start with the end in mind and reverse engineer the outcome you desire. It’s a logical process that works, and can be replicated time and time again in your diagnostic routine.
        
    Your ‘end in mind’ in this instance is a vehicle where the fault no longer exists, that won’t appear back across the threshold of your workshop anytime soon. But how do you guarantee that?

    One test to rule them all
    I love nothing more than when the delegates working through our training programs have a technical epiphany. This happens at many points on their path of learning, but none more than with bypass testing.
        
    Bypass testing is step nine in Johnny’s diagnostic circle of love (our 15 step routine), and often the key element in the first time fix. The good news for you is that it doesn’t require mythical creatures to forge their magical powers into an object that only one technician can possess. It’s something that every tech can learn, and become a diagnostic wizard.

    What is bypass testing?
    Quite simply it’s fixing the vehicle before you fix the vehicle. Let me explain.
        
    Wouldn’t it be great if you suspected that a Mass Air Flow sensor was at fault and you could prove that you were right before you fitted a new part, or spoke to the owner of the vehicle. If you could do that then the positive effect it would have on you and the business you work for would blow you away.
        
    Picture this: Your customer has reported that the vehicle is low on power. You’ve diligently questioned them, experienced the problem with them on a road test, and the bought the vehicle into the workshop.
        
    You’ve pulled codes and found none present, followed by taking a look through serial data to hunt for diagnostic clues. It doesn’t take you long to identify that the MAF sensor frequency looks a little low at 1.5 Khz and your fuel trim data is incorrect and making a positive corrections. You’ve seen a bunch of these before and know that 1.85 Khz is a suitable value for this vehicle.
        
    You’re keen to prove that the serial data is leading you in the right direction so confirm the sensor output with your oscilloscope. The oscilloscope frequency mirrors that of the serial tool and your starting to get that warm fuzzy feeling that an you’re onto something.

    Steady the buffs
    You’ve been close to success before though, only to be thwarted in the final moments so you’re keen not to be caught out twice. You know that documenting the reasons that the MAF output could be incorrect is the way to go, and duly make a list of tests required to confirm your theories.

  • LAST CHANCE TO ENTER TOP TECHNICIAN 2019  

    Techs wanting to take part in Top Technician 2019 have until 23.59 tomorrow (Friday 4 January) to take the round one quiz, or risk missing out on the competition this year.

  • Do you have a business or a profitable job? 

    It’s a favourite of mine, and one we ask of all garage owners that join the Auto iQ business development programme...
      
    “Do you have a business or a profitable job?” Not sure which one you’ve got? Carry on reading.
        
    That question is a doozie and is often met with a few seconds of silence followed by a mixed range of answers whilst the questionee arranges their thoughts. The question is designed to be thought-provoking and entice the garage owner to work through the differences between the options.

    Different sides of the coin
    What’s the difference between a profitable job and a business? It’s a fine line with a BIG difference.
        
    Quite simply if you have a profitable job the income from your work (where you spend your hours in the day) reduces when you’re not doing that work. You might be able to get away from the business for a week or two but longer than that will have you sweating, you’ll wonder if your techs are efficient without you in the building, concerned that your numbers are going south.
        
    A business on the other hand will run without you being there for a significant length of time. Which one do you have?
        
    I can feel the tension elevating as some of you may be rising from you chair ready to give me a good talking-to. Hang fire though and hear me out. In no way am I saying that having a profitable job is wrong. Quite to the contrary. If that’s what you set out to achieve then who am I to say any different? Here’s the deal though. Most garage owners don’t embark on this amazing journey to be ‘self employed,’ they do it to build a bigger and better future for their families. They did it to have more time with their loved ones, the funds to allow this and probably have early retirement thrown in with the business providing the income. Can a profitable job do this or do you need a business that’ll run without you? I think you know the answer.

    What’s the difference?
    So you’ve decided that a business is preferable to a profitable job. But is there really that much of a difference? Let’s take a look. It often comes down to nothing more than a state of mind that separates these different sides of the same coin.
        
    Let’s compare the owner with a profitable job and the business owner. At first glance I’d challenge you to notice the difference. They’ll both have a business that they’re proud of and rightly so, they’ve worked hard to build it. More often than not they’re both skilled technicians, have the respect of their team as well as their customers. Then how can it be that one earns significantly more than the next. One word, focus.
        
    Our owner with the profitable job will be very focused. He’s focused on his own ability to fix the vehicles in his workshop often working shoulder to shoulder with the technicians. The technicians respect him because of his technical ability and work hard alongside him. All admirable qualities.
        
    Our business owner also has a laser-like focus, his target is a little different though. His gaze is firmly fixed on a vision of the business he’s building and knows that long term success requires not only focus but patience. He’s acutely aware of the one thing that will bring freedom and the time with his family (the reason he started this venture) is the team he builds and trains.
        
    This isn’t to say that he doesn’t roll up his sleeves and lead from the front when required, it’s just that his daily focus is on the strategic functions of the business that drive success, rather than the day-to-day tasks that so many owners get caught up in. There’s a huge benefit to this as well. You get to keep the skin on your knuckles.

    Dominant thoughts
    It’s a proven fact that we all move through our day in the direction of most dominant thoughts. What does your typical business owner ponder?. Now I can’t read minds (how cool would that be?) but I do know that these are the questions that need to be answered:

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