When you leave a job it is important that you know what your final pay should consist of. Far too many people automatically assume that their employer will pay them everything they are owed. Unfortunately there are occasions where an employer may “overlook” full entitlements.
While it should not normally be a problem, if there has been any animosity on leaving your job or you have been made redundant, this can often cause disagreements with your final remuneration. Legally, you only have three months less one day to claim any monies owed by your former employer. If you fail to lodge a claim during this period, you may lose your entitlement to missing funds.
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Common missed payments
It should be fairly easy to work out your basic salary, but when leaving your job you may also be eligible for:-
- Redundancy pay
- Holiday pay
- Sick pay
On occasion, you might also be able to claim additional payments covering:-
- Maternity leave
- Paternity leave
- Adoption leave
- Shared parental leave
- Dependent leave
It may be that you are part way through one of the above entitlements and you have come to an arrangement with your employer to make you redundant. This sometimes happens where an individual/couple begin a family and decide to leave work.
Your last remuneration payment
Legally, your employer must pay everything which is due to you as part of your last payment. On occasion, where perhaps you have taken holidays above and beyond your apportioned annual entitlement, you may owe your employer money. Normally, this would be deducted from your final pay with details on your payslip.
As many companies run a large payroll system, the likelihood is that you will receive your final payment on the normal pay day, for example the end of each month. It matters not whether you leave halfway through the month; your employer has no legal obligation to pay you early. This payment date is the point at which your three months less one day claim period begins. If you are in any doubt as to your “final payment date” it is important to clarify this with your employer.
While there are occasions where employees will be dismissed immediately, the majority will serve some form of notice period. It is useful to use this notice period to confirm with your employer the level of remuneration you should expect in your final pay. This gives you the chance to make sure all entitlements have been taken into account. Correct any errors before payment is received.
Make sure your payslip is correct
If you are an employee or a worker, you have a legal right to a payslip which should detail working hours, gross remuneration, deductions and net remuneration. There should be enough information on your payslip so that you can work out your pay per hour.
You may also be entitled to an array of additional payments. So, your final payslip could include any of the following:-
- Surplus holiday entitlement
- Redundancy/notice pay
- Sick pay
- Maternity, paternity, adoption and parental leave payments
- Overtime
- Commission payments
- Bonuses
There will be occasions where commissions or bonus payments are normally deferred for a certain period. In this scenario, your employer is not legally obliged to pay you early, but many will do so in order to tie up any loose ends when you leave.
If there are missing payments or figures on your payslip are wrong, it is important that you speak with your employer immediately. Also, remember that you are legally entitled to a payslip while in employment and when you leave.
Querying your final pay
If you believe that your final pay when leaving a job is incorrect, it is important to speak with your employer as soon as possible. Aside from the three month less one day period you have to claim missing payments, over time memories can fade. In most situations, your former employee will likely have made a simple mistake and incorrectly calculated your non-standard entitlements.
When there is confusion, it is important to take an informal approach in the first instance, contacting your former employer via:-
- Telephone
- Letter
For many people, email will be the best form of communication as it is swift and creates a paper trail. Simply ask your previous employer to explain the breakdown of your final pay or why there has been a delay. There may be perfectly acceptable reasons for any errors/delays. There shouldn’t be, but on occasion mistakes can happen.
Once the situation has been addressed, and your previous employer has acknowledged the shortfall, they should pay monies due as soon as possible. While many will try, your previous employer should not make you wait until the next payroll date before sending missing payments.
Common issues when leaving employment
There are a number of relatively common issues which may arise with regards to your final remuneration. If you believe that you have been short changed, it is important that you collate evidence to back up your claim.
Total hours worked
If you believe that you have worked more hours than you have been paid for, you should gather as much evidence as possible such as:-
- Clock in records
- Old rotas
- Official confirmation of your shifts
Where you work overtime on a regular basis, it is important that you keep a record of these additional hours for your own reference. This is the type of information which would be invaluable when trying to prove your additional working hours.
Holiday entitlements
Payment for surplus holiday entitlements is a grey area with no clear definition. In theory, your employer is not legally obliged to pay for holiday entitlements not used prior to your exit. However, if it specifically states in your employment contract that you would receive payment for surplus holidays, this is very different.
Often referred to as payment in lieu of holiday entitlement, it is simply a case of apportioning your holiday entitlement over the company’s financial year. For example, if your holiday entitlement was 30 days, but you only worked six months in your final year, the pro rata entitlement would be 15 days. So, if you have not yet taken 15 days holiday this would create a surplus and you could receive a payment.
There may be occasions where, as in the above example, you took 17 days holiday prior to leaving your employer. In theory, as you had only accumulated 15 days throughout the six-month period, your employer could claim repayment for the additional two days. If this was the case, then any repayments will be detailed on your payslip.
If there are any discrepancies regarding your holidays, you should collate as much evidence as possible. This may include:-
- Evidence of your correct holiday entitlement
- A contractual condition detailing your entitlement
- Human Resources printout of holidays taken
This is all information which should be readily available to both the employer and employee. If your employer still refuses to pay your full holiday entitlement, you may need to make a formal complaint.
Redundancy pay
Before looking at redundancy pay in more detail, there are two different types of redundancy payment known as:-
- Statutory redundancy pay
- Contractual redundancy pay
Some employers will stick to the statutory redundancy payment calculation while others may offer an enhanced redundancy payment in an employee’s contract. As a consequence, it is very important to check the level of redundancy payment you received.
If there is a redundancy clause in your contract which stipulates a payment less than the statutory redundancy level, this is not enforceable in law. In this situation, you would refer back to the statutory level of redundancy. Where there is an enhanced redundancy package in your employment contract, your employer must honour this.
Calculating your redundancy pay
You will only be entitled to redundancy pay if you have worked for your employer for at least two years continuously. Your level of redundancy entitlement will vary as a consequence of your age and each full year of employment. The statutory calculation is as follows:-
| Age | Redundancy entitlement per full working year |
| Up to 22 years of age | Half a week’s normal pay |
| Age 22 to 40 | 1 week’s pay |
| Aged 41 and above | 1.5 week’s pay |
So for example, if you had 10 years continuous service between aged 25 and 35, you would receive one week’s pay for each full working year. This would equate to 10 week’s normal pay. On occasion, under the TUPE system, you may have continuous employment brought forward from a previous employer.
While redundancy payments are free of tax, there are limits as to how much you can claim:-
- Maximum £538 per week
- Maximum 20 year length of service
Even though the vast majority of employers will calculate your final payment correctly, it does no harm to be up to speed with your entitlements.
Verifying deductions
On occasion, your previous employer may be fully entitled to make a number of deductions from your final payment. The majority of deductions can only be taken without your authorisation, if there is a clause allowing this in your contract of employment. Some of the more common deductions include-
- Holiday entitlements
- Maternity pay when you fail to return to work
- Training courses paid for by your employer
- Employer/employee loans
If your previous employer is claiming back over payment of wages, this does not require your agreement or a clause in your contract. However, all deductions do need to be clearly noted on your final payslip.
When approaching your leaving date, you should go through your contract and pay particular attention to clauses relating to deductions. If there are no relevant clauses in your contract, your employer would be acting illegally if they were not related to wage overpayments. In this scenario, it is important that you bring this to the attention of your employer.
Sick pay
If you are unable to attend work during your notice period, you should still be entitled to statutory sick pay. However, due to the fact that you were unable to work during your notice period, the situation may become more complicated. Take advice!
Parental leave
When we researched parental leave for those you have been given notice by their employer, we were surprised at the law as it stands. If you were entitled to any of the following leave prior to your notice period:-
- Paternity
- Maternity
- Adoption
- Shared parental leave
Your previous employer is still obliged to make these payments until such a date as you are no longer eligible. For example, you may already have planned maternity leave prior to your notice. In this scenario, you would be entitled to 39 weeks statutory maternity pay (assuming you had been working for the company for at least 26 weeks) paid by your previous employer.
Some employment contracts will offer enhanced payments, above and beyond the statutory requirement. On occasion, you may be asked to pay back the difference between the statutory leave payment and any enhancement offered by your employer. Your employer cannot reclaim statutory leave payments. This is probably an area of employee protection/entitlement which many people are unaware of!
Employer has ceased trading
Many employers may be forced to reduce their staff numbers as a consequence of financial difficulties, indeed some may go out of business altogether. While this does not remove their legal obligations regarding payments to employees, it can sometimes be challenging getting money that you are owed. There are numerous reasons why an employer may go out of business:-
- Bankruptcy
- Administration
- Liquidation
Where there is a third party, such as an insolvency practitioner, managing the company’s affairs, you will likely be contacted about claiming for monies due. In effect you would become a creditor. However, if there are insufficient funds to cover your previous employer’s legal obligations to you, the UK government will offer a degree of assistance.
You may be able to claim for the statutory notice period, redundancy entitlement and other eligible payments. Whether you would receive your entitlement in full would depend upon the monies owed and limits on UK government funded payments. At the same time, it is also worth investigating your entitlement to unemployment benefits and other financial assistance.
Raising issues with your previous employer
It may be that you become aware of issues with your final payment prior to your official leaving date. If this is the case, and informal talks are unsuccessful, you may be forced to lodge an official grievance – as an employee of the company. Under this procedure, your employer is legally obliged to review your grievance and reply in full. If they fail to respond, or you disagree with their conclusions, you can still take legal action.
For those who have already left employment, you should contact your previous employer as soon as possible. It is advisable to write or email details of your dispute, supplying as much supporting evidence and information as possible. This type of communication should include information such as:-
- Date you left employment
- Which payments are incorrect/missing
- Evidence to back up your claims
- When you expect to be paid
If you have strong evidence to support your claims, it is likely that your employer, assuming they are still trading, would look to rectify the situation as soon as possible. Where there are genuine disagreements, you may need to look towards conciliation services or in a worst-case scenario legal action.
Unable to contact your previous employer
There may be occasions where your previous employer has been taken over, moved, changed name or they may have gone out of business. There are still various ways to find contact details:-
- Companies House
- Internet searches
- Local authority
- Trading standards
- Contact landlord
- Visit previous premises
While visiting previous premises may sound like “closing the stable door, after the horse has bolted”, many companies leave details of their new address at their old premises. In the event that a liquidator or insolvency practitioner had been appointed, they would likely have mail redirected from the previous company address. Nowadays, there are so many ways to trace companies and individuals that this should not really be a problem.
Settling disputes on your final pay
Unfortunately, if a parting of the waves has been particularly acrimonious there will likely be disputes and disagreements regarding your final pay. There are a number of options open when looking to resolve disputes such as:-
- Informal talks
- Formal talks
- Official grievance
- Reconciliation services such as ACAS
- Employment tribunal
- Legal action
If it is obvious you are eligible to missing payments, and you have the supporting evidence, it is unlikely your previous employer would ignore this. Alternatively, if your previous employer maintained their stance, and your grievance ended up in the court, they may lose and face significant legal costs. Where there are some grey areas, it may be that you have to reduce your financial demands to find some middle ground.
Summary
There are many issues to take into consideration when reviewing your final payment after leaving an employer. There are legal obligations and statutory rights, contractual protection and simple errors to take into consideration. In the event that you do have a dispute, informal talks should be your first route. If talks on your final pay when leaving a job are unsuccessful, you can escalate this to the next level and a more formal process.