How can I help my client recover their unpaid wages?

Wages problems for the generalist adviser

This article was originally published on 23 March 2023. It was updated on 18 October 2023.

Advisers are often asked by clients how they can recover pay that their employer owes them. This article describes the different options available and how to decide which is best.

Check if wages are due

When faced with a problem about unpaid wages, the first step is to check the client’s entitlement to the money they say is due. Looking at the client’s contract and payslips can help to establish the position. All workers are entitled to a written statement of their main terms and conditions, and to payslips.

Some questions to consider

Is the issue underpayment, or not being paid at all? How has the worker’s pay been calculated — for example, if someone is hourly paid, have they been paid for all the hours they worked; at what rate? Were they expecting a bonus or commission? Should the worker have been paid SSP or holiday pay? Have deductions from pay been made by the employer; if so, why? How much is outstanding and has the date for payment passed?

What wages are payable, pay periods and when payment is due depend on the agreement between the client and their employer, although some statutory restrictions apply, for example almost all workers have a right to the National Minimum Wage (NMW).

Raise the matter with the employer

Once the client’s entitlement has been established, the next step is to raise the matter with the employer. It’s usually best to start by raising the matter informally, in case there has been a misunderstanding or a genuine mistake made. If an informal approach fails or if it is not appropriate, the client should write to their employer saying what they think is due and why- this could be in a formal grievance.

If there is a concern that the employer will react badly to the complaint and retaliate, it’s advisable for the letter to say that the client is asserting a statutory right. Under section 104(4) of the Employment Rights Act 1996 (ERA), dismissing an employee for asserting certain statutory rights is automatically unfair — the employee does not need 2 years of service to claim. Even if the protection under section 104(4) does not apply to the client, for example because they are a worker, or because they have to claim breach of contract rather than unauthorized deduction from wages (UDW) to recover their wages, it’s still advisable to create a paper trail to support a claim.

Dear Mr Smith,

I’m concerned that I have not been paid wages that are due to me. I believe I am owed the sum of £1,000 for the work that I did in February and that I should have been paid by 1st March. Please would you pay the sum due to me within the next 7 days. I am asserting my statutory right not to have unauthorized deductions made from my wages.

Yours sincerely

Sometimes employers will admit that wages are overdue, but say that the client will be paid in future. Whether the client should agree to wait longer for payment depends; consider the risk that the client is being pointlessly strung along, and always advise the client about time limits(see below). The original time limit for making a claim still applies, even if the employer promises that payment is coming at some future date.

The client might be thinking about resigning because they are not getting paid. Not paying wages is, in most cases, a fundamental breach of contract for which a client could resign and claim constructive dismissal. However, whether claiming constructive dismissal really is the right option for the client depends on a number of factors, so an adviser should always be very cautious before recommending this. The client will no longer have a job, and if they have less than 2 years of service, their compensation is likely to be limited to wages during the notice period, because they will not be able to claim ‘ordinary’ unfair dismissal. Even if the client does have 2 years of service, the dismissal may be deemed fair, even if it is in breach of contract.

If the outstanding wages are not paid

If making a complaint to the employer doesn’t result in payment, the next step is to work out the best way for the client to recover the wages due to them. The options are:

• Claim UDW in an Employment Tribunal (‘Tribunal’)- there’s a flow chart here that can help assess whether this option is available
• Claim breach of contract in a Tribunal
• Claim breach of contract in the civil courts (where the claim value is not more than £10,000, normally the small claims track of the county court)
• Make a complaint to HMRC- for non-payment of statutory payments or the NMW

Which option is best depends on:

• The client’s employment status
• Whether the client still works for the employer
• What the payment is for and whether more than £25,000 is going to be claimed
• The time scales
• Whether it appears that the client is not being paid the NMW

Employment status: is the client an employee, a worker or self-employed?

If the client is genuinely self-employed, they cannot make a claim in a Tribunal. They will need to claim breach of contract in the civil courts.

Workers and employees can make claims in a Tribunal for UDW.

Only employees can claim breach of contract in a Tribunal. Workers will need to claim breach of contract in the civil courts.

Does the client still work for the employer?

If the client still works for the employer, they cannot claim breach of contract in a Tribunal. They can however claim breach of contract in the civil courts.

The client can claim UDW in a Tribunal regardless of whether they still work for the employer or not, subject to the claim being in time.

What is the payment for?

It’s a statutory payment

If the client is owed a statutory payment, such as SMP or SSP, the client should make a complaint to the HMRC Statutory Payment Dispute Team if efforts to resolve the dispute with the employer fail. There’s a deadline of 6 months from the earliest date from when entitlement is in issue to make a complaint to HMRC. Although statutory payments do count as ‘wages’ for ERA, case law suggests that a Tribunal can only deal with claims where entitlement to the statutory payment is not in dispute, for example where the employer admits the worker should be getting SSP but then doesn’t pay it.

It’s recoverable as a UDW

If the payment is

• Classed as ‘wages’ according to section 27 of ERA, and
• It is not an ‘authorized deduction’ under ERA

then the best option for the client is usually to claim UDW in a Tribunal. There’s an explanatory flow chart here. In the case of failure to pay when the worker was on holiday, it may be better to make a claim under the Working Time Regulations 1998. Regulation 16(4) of the Working Time Regulations 1998 says that a worker’s statutory right to paid holiday does not also confer a contractual right to it. This means that in most cases, it’s not possible for a worker to claim breach of contract instead.

All things being equal, claiming UDW is better than claiming breach of contract, because an employer cannot counterclaim in an action for UDW, and they can’t set off money that the worker owes them.

It’s another kind of payment

If a claim for UDW can’t be made, for example because the client is claiming expenses (not classed as ‘wages’ under ERA), then claiming breach of contract is the only option.

If the client is claiming more than £25,000, they cannot bring a claim for breach of contract in a Tribunal- but they can in the civil courts. There is no ceiling on the amount that can be claimed for UDW.

Consider deadlines

Claims for UDW must be started within 3 months less 1 day from when the payment was due, for example, the pay day when the worker should have been paid.

If there is a series of payments due (for example, because the employer has for months failed to pay the client for overtime work), the Tribunal deadline runs from when the last payment was due. All the payments in the series can be claimed, going back to a maximum of 2 years from when the claim is started in the Tribunal (some exceptions apply that advisers will need to check).

For breach of contract in a Tribunal, the deadline is 3 months less 1 day from when employment ends, and the claim has to relate to something arising or outstanding on termination. That means that if wages are outstanding when employment ends, the employee can claim for them even if a claim for UDW would be out of time.

For breach of contract in the civil courts, the deadline is 6 years from when the payment was due.

Consider if the client might not have been paid the NMW

There’s information about the NMW on the gov.uk website. If it looks like the client has not been paid the NMW, an alternative to making a Tribunal claim or claim in the civil courts for this is to complain to HMRC who can investigate and take enforcement action. There is no deadline for complaining to HMRC, but HMRC will not take action if the client also has a Tribunal or court claim ongoing for breach of the NMW. Where the client is bringing a Tribunal claim that does not directly concern the NMW, for example unfair dismissal, we understand that HMRC are likely to delay taking action until the proceedings are resolved, to ensure that they do not investigate a complaint that has already been determined by the Tribunal.

There are several advantages to complaining to HMRC. They will do the leg work and all worker pay in the workplace will be looked at, not just the complainant’s pay. We understand that their investigations routinely cover the 3 years prior to the complaint but sometimes go back further. Many employers will be very unhappy at being investigated by HMRC, so alerting an employer to this possibility can sometimes prompt settlement. The chief disadvantage however is that HMRC will only investigate the non-payment of the NMW, not other complaints. In addition, although dismissal for raising a NMW issue is automatically unfair, it’s worth being aware of the risk of retaliation, especially in a small workplace where it may be obvious who made the complaint.

Some final points

If the client is going to make a claim in the Tribunal, they have to go through Early Conciliation first. Early Conciliation is not required before bringing a claim in the civil courts, but attempting conciliation of a dispute via ACAS could be advantageous to the client.

One advantage to claiming in a Tribunal is that no fee is payable to start the case, unlike in the civil courts. The risk of having to pay costs is also a factor to consider, especially if the client is going to make a claim in the civil courts for an amount that exceeds the small claims jurisdiction (currently £10,000). There’s an article about legal costs on advicenow.org.uk.

If the client is going to make a claim in the Tribunal, it’s worth considering whether they also have other technical claims that can be made at the same time, to help increase the claim value and pressure on the employer to pay up. For example:

• If the client did not get a written statement of terms and conditions when they started work, or when changes were made to their terms and conditions, they may be able to claim for breach of section 1/section 4 of ERA. A Tribunal can award compensation of 2 to 4 weeks’ gross pay for this (subject to cap on a week’s pay) but only in conjunction with another successful claim.
• If the client did not get written itemized pay statements, they may be able to claim for breach of section 8 of ERA. A Tribunal can award compensation equivalent to unnotified deductions (including for example for tax and NICs) of up to 13 weeks.
• If the client raised a grievance about their unpaid wages but the employer ignored it or mishandled it, the client may be able to claim an uplift of compensation of up to 25% for breach of the ACAS Code.
• If the client sends the employer a ‘production notice’ because they believe they are not being paid the NMW, and the employer fails to comply with it, the client may be able to claim an award of 80 hours at the rate of the NMW under section 11 of the National Minimum Wage Act 1998.

Finally, before taking any action, it’s important to think about whether there could be difficulties in enforcing a judgment against the employer, for example because the business may be insolvent. It’s a good idea to manage the client’s expectation about whether they will actually recover their money and to manage their expectations about the process, including that there are currently substantial delays in the processing of Tribunal claims.

If you’re a Citizens Advice adviser and you need further advice on an individual case contact the Expert Advice Team for help. You can submit a consultancy request to the Employment Expert Advice Team. Information on employment rights is also available on AdviserNet.

Stephanie McKeon is an employment expert in the Expert Advice Team at Citizens Advice.

The information in this article is correct as of the date of publication.

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