What to do if you’ve been underpaid

Does your employer owe you money? There are many ways to be underpaid - perhaps your hourly rate isn’t high enough, you’re not getting overtime payments when your contract says you should, or maybe your redundancy payment wasn’t calculated properly. In this article, we look at the different ways you can be underpaid and explain how to get your money back.

Your employer must give you an itemised statement every time you’re paid. This helps you understand how your pay has been calculated and it’s the first step in working out if your employer owes you money. 

The National Living / Minimum Wage

By law, there’s a minimum amount your employer has to pay you per hour. If you’re over 23, this is called the National Living Wage. If you’re under 23 or an apprentice, this is called the National Minimum Wage. In this article, we collectively refer to these as ‘the minimum wage’. 

The government updates the rates every year. You can check the current rates on the government website.

Who gets the minimum wage?

All employees and workers must be paid the minimum wage, whether they’re full time, part time or in training. This includes:

  • casual workers
  • workers on zero hours contracts
  • agency workers
  • apprentices, and
  • workers from other countries.

The minimum wage doesn’t apply to:

  • self employed people
  • volunteers
  • company directors
  • armed forces personnel
  • people doing work experience / shadowing and
  • children under school leaving age. 

Increases in pay

From time to time, you may be entitled to a higher rate of pay. For example, when you move into a different age bracket or when the government increases the rates. You might want to make sure your employer is aware of the change. 

The increase won’t apply until the start of the next ‘pay reference period’. If you get paid weekly, the pay reference period is 1 week. If you get paid monthly, the pay reference period is 1 month.

Here’s an example:

  • Tina’s 21st birthday is on the 8th May - she’s now entitled to a higher rate of pay.
  • Tina gets paid monthly on the 25th of every month.
  • Her old rate of pay will apply up to the 25th of May.
  • Tina will get the new higher rate of pay from 26th May (the start of the next pay reference period).  

Check you’re getting the minimum wage

Your average hourly rate (before tax, National Insurance and pension contributions) in each pay reference period must be no less than the minimum wage. So, if you’re paid monthly, your average hourly rate will be your monthly pay divided by the number of hours worked in that month. 

You can use the government calculator to check you’re being paid enough. You can check for last year too. 

What to do if you’re not getting the minimum wage

If you think you’ve been paid less than the minimum wage, it’s usually best to raise the issue with your employer first - it might have been an honest mistake. If that doesn’t work, you can:

  • report your employer to HMRC using this government form. HMRC will investigate your claim and, if they agree, order your employer to give you the money you’re owed. The claim can go back up to 6 years, or
  • raise an Employment Tribunal claim for ‘unlawful deduction of wages’ (we explain this in more detail below).

You can’t do both.

Some people are reluctant to complain if they’re not getting the minimum wage. They fear they’ll get given fewer hours in future, or even lose their job. However, it’s unlawful for your employer to treat you poorly (subject you to a ‘detriment’) because you asked to receive the minimum wage. You can learn more about detriment from Citizens Advice.  It is also automatically unfair for your employer to dismiss you for asserting your rights to the minimum wage. Learn more about automatic unfair dismissal.

If you’re treated unfairly because your age means you’re entitled to a higher rate of pay, you could have a case for age discrimination.

My pay was lower than expected

The Employment Rights Act 1996 says your employer can’t make ‘unlawful deductions’ from your wages. Wages can include:

  • normal salary/wages 
  • commission payments
  • overtime pay (if it’s in your contract)
  • bonus payments (in some circumstances)
  • statutory sick pay
  • statutory holiday pay and
  • statutory maternity, paternity, adoption or shared parental pay.

If your employer owes you any of these, you may have a claim for unlawful deduction of wages. If the type of payment you are claiming about doesn’t count as ‘wages’, then you may be able to make a claim for breach of contract.

You may notice the list doesn’t include redundancy pay or notice pay. Don’t worry, if your employer owes you redundancy or notice pay, you can still take action to get your money back - see below. 

What deductions to my pay are acceptable?

Your employer can make deductions to your wages if:

  • required by the law (tax, national insurance)
  • your contract authorises the deduction or
  • you’ve consented to the deduction in writing. 

That’s why it’s important to check your contract. A low paycheque could be because your contract allows your employer to deduct for a personal emergency or lateness, for example.

If you’re pregnant, you have the right to reasonable time off for appointments without any reduction in pay. 

Claiming for unlawful deduction of wages

If you think your employer has made an unlawful deduction from your wages, it’s best to raise the issue with them informally first. If this doesn’t work, you may wish to raise a formal grievance

If your employer still doesn’t correct the underpayment, you may need to raise an Employment Tribunal claim. You can raise this type of claim no matter how long you’ve worked for your employer. 

However, you only have 3 months (less one day) from the date of the deduction in question to bring your claim. If you’ve experienced a series of reductions, it’s 3 months (less one day) from the last of those deductions. Find out more about the timescales involved around Employment Tribunals.

You can only claim for payments going back 2 years (it used to be 6 years, but this changed in 2015). 

Notice pay

When you leave your job, you’re entitled to a notice period. As a minimum, you should receive the statutory minimum notice period. Your contract may set out a longer notice period. Usually, you should receive your normal pay and benefits during your notice period. If you don’t, you may have a claim for a type of breach of contract called wrongful dismissal. There’s no minimum service period for a wrongful dismissal claim, but in the Employment Tribunal you only have 3 months less 1 day from when your employment ended. You would have 6 years if raising this in the civil courts. 

Find out more about notice pay from ACAS

Redundancy 

Should I be getting a redundancy payment?

If you’re made redundant, and you’ve been employed for more than 2 years, you may be entitled to a statutory redundancy payment. The amount of money you get depends on:

  • your weekly pay (including regular overtime which is in your contract and any bonus / commission)
  • how long you’ve worked for your employer and
  • your age.

You can use this government redundancy calculator to work out how much redundancy pay you’re due. 

You should get the payment on your final pay date. It must be accompanied by a written statement explaining how it was calculated.  

You may also be entitled to a contractual redundancy payment, if it’s in your contract.

What if I don’t get my money?

If you don’t receive your redundancy payment, you should write to your employer as soon as possible stating what you’re entitled to. You might want to include a copy of the calculation from the government website. 

You must make a claim for a redundancy payment within 6 months less one day of your employment ending or you risk losing your right to the money. Find out more about raising an Employment Tribunal Claim

My employer is insolvent and they owe me money

If your employer is insolvent, it means they can’t pay their debts. You can find out if your employer is insolvent using the Companies House website.

If your employer is insolvent and they owe you money, you can use the government’s insolvency service to apply for unpaid:

  • wages
  • overtime
  • holiday pay
  • commission
  • redundancy and
  • notice pay. 

What next?

Underpayment can happen in many different ways. The type of action you take will depend on your particular situation. So it can be difficult to know where to start. At Valla, we provide a secure platform where you can gather and organise your evidence. Sign up for your free account



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