Employers entitled to deduct only 1/365th
Where staff take industrial action and therefore fail to deliver their contractual duties, it is open to an employer to make a deduction for that part of their role that they fail to deliver. It is also open to them to take a harder line and refuse to accept partial performance and therefore to deduct a full day’s pay having made clear that they will not accept partial performance.
Where there has been non-performance it is established that an employer can make deductions from the employee’s wages on a daily basis. Where employees are paid an annual salary it had been thought that pay should be deducted at the rate of 1/260th for each day of strike action, which would reflect the normal working days in a year based on a 5 day working week.
In Hartley and others v King Edward VI College  UKSC 39, the Supreme Court decided that where employees were employed on annual contracts, pay was to be apportioned on a daily basis over 365 days, yielding a daily figure of 1/365.This was based on a finding that s.2 of the Apportionment Act 1870 applies to contracts of employment and therefore you pro rata over every day of the year, not just the five working days of each week.
In order for employers to avoid this applying and to be able to deduct 1/260th per day of industrial action, employment contracts should stipulate that the principle of equal daily apportionment will not apply.
Posted on 24/05/2017 in Legal UpdatesBack to Knowledge