Payment of Wages

Background to Wages Legislation

The Truck Acts 1831 to 1896 required payment of most manual workers in cash, or more precisely, the “current coin of the realm”. The initial purpose of the legislation was to limit abuses whereby workers were paid in tokens, redeemable at the employer’s shop.

The legislation was modernised in 1979, and provided incentives for progression from payment in cash to cheque, bank transfer and other payment mechanisms, by agreement.  Employees who agreed under the 1979 Act to accept payment other than in cash, can revert to cash payment, upon termination of the agreement.  There is an entitlement to terminate the agreement on four weeks’ notice.

The Payment of Wages Act 1991 provides that the method of payment is as provided in the employment contract. It applies to new contracts entered after the Act.  It continued the default entitlement to payment in cash, for employees who had previously been paid in cash prior to the commencement of the Act, until an agreement to the contrary was made.

Wages must be played in one of the following manners; cash, cheque, bank draft, postal order or warrant or credit transfer. The default position is that payment should be in cash. Payment in kind is not generally allowed.  Wages include bonuses, commissions, holiday pay, sick pay, sums paid on termination of employment and payment in lieu of notice. The rules do not apply to payments for expenses, pension contributions redundancy payment and benefits in kind.


Means of Payment

The Payment of Wages Act 1991 provides, that for contracts entered after the Act, that wages are to be paid by the method of payment provided in the employment contract. The means of payment must be a readily negotiable method.

Wages may be paid by way of

  • cheque and bank draft drawn on a commercial bank;
  • payable order issued by a Government department;
  • postal order;
  • money order;
  • paying order,
  • warrant issued or drawn on An Post;
  • credit transfer to the employee; or
  • cash.

Application of Legislation

“Wages” cover all elements of pay and remuneration.  This includes normal basic pay, overtime, fees, commissions, bonuses, sick pay, maternity pay, allowances and other sums, including sums payable on termination of employment.

Certain types of reimbursement and benefits are not “wages” for the purpose of the Act.  They include reimbursement of expenses, superannuation contributions, allowances and gratuities in connection with the death or retirement, compensation for loss of office, redundancy payments, benefits in kind, payments other than as employees, loan repayments. Social welfare pensions are not wages for this purpose, even if they are employment related.

If industrial or equivalent action affects the ability of banks to provide payments, there is provision for adjustment by consent, with a default of providing cash.

The Act applies to

  • employees;
  • persons employed through subcontractors and employment agencies;
  • persons in the service of the State, local authorities, and other public sector bodies;
  • members of Garda Síochána and the Defence Forces;
  • persons working under an apprenticeship.

Statement

An employee must be given a statement in writing, setting out gross wages, deductions and net wages. The statement must set out full particulars of their gross wages and details of the basis and amounts of deductions.  It must be given at the time of payment.  Where payment is made by direct bank transfer, it must be given after payment.

The information must be kept confidential as between employees in so far as possible. The employee must be informed of changes in wages paid. The statement is valid notwithstanding a clerical error made in good faith.

Contravention is an offence subject on summary conviction to a fine up to €2,500. The failure can also be the subject of a claim for remedy to the WRC.


Deductions

The making of deductions from wages is regulated. An employer may not make deductions from wages unless required by law or permitted by the employer’s consent.  The employee may consent specifically, or it may be provided by the contract. The consent may be in the employment contract in force at the relevant time, or it may be the subject of a separate advance agreement.

An employer may not generally deduct payment for goods and services.   Deductions must be fair and reasonable and authorised by the contract. The employee must have a copy of the contractual provision or notice in writing of it.

A contract to repay a loan is not by itself an authorisation to deduct, repayments of capital or interest on the loan from the debtor’s salary.  Deductions for loans provided for training purposes have not, in some cases, passed the “fair and reasonable” test above.

Failures to pay, even in circumstances where the employee is in breach of contract may contravene the legislation. An unauthorised suspension without pay may constitute an unlawful deduction. Deductions arising on termination of employment, by way of set off against monies otherwise due, may be unlawful unless authorised.

The obligation to pay ceases on the valid termination of the employment contract.  Questions of who has terminated the contract and who has accepted the termination or repudiation may arise.  In some cases, it may not be obvious.  It is a matter of judgment as to whether one party has had cause or not, such as to justify his termination of the contract without notice.


Deductions for Misconduct

There are special provisions applicable to deductions for misconduct or poor performance.  An employer may not make a deduction from wages in respect of an act or omission or for goods or services supplied by the employer unless the deduction

  • is required or authorised to be made by virtue of an express or implied term of the contract;
  • the deduction is of an amount that is fair and reasonable in the circumstances; and
  • before the time of the act or omission or the provision of the goods or services, the employee has been furnished with a copy of the contract of employment, or in other cases, notice in writing of the existence and effect of the term.

Where an employer makes a deduction for an act or omission, the employee must be given details of it in writing and particulars of the deduction at least one week beforehand.  If the deduction is compensation for damage suffered by the employer, the amount cannot exceed the loss suffered. If the deduction is for goods and services, the amount must not exceed the cost.

The deduction must not occur later than six months after the date that the act or omission occurred or when the goods or services have been supplied.


Permissible Deductions

The general provisions on deductions do not apply to

  • statutory deductions, most commonly tax and social insurance;
  • deductions paid to a third-party in accordance with consent, e.g. trade union, health insurance contributions, etc.
  • deductions for repayment, provided they do not exceed the amount due;
  • deductions for not working during participation in a strike or industrial action or disciplinary proceedings under statute;
  • deductions arising from court orders such as attachment of earnings,
  • deductions permitted are required by court orders in favour of the employer against the employee.

Enforcement I

Noncompliance with the Act may be enforced through a complaint to the WRC and/or civil action.  Formerly, the complaint was made to the Labour Court

Failure to comply with the legislation may be the subject of a criminal prosecution. Contravention of the legislation is an offence, subject on summary conviction to a fine of up to €2,500.

An employee may make a complaint to the WRC. The complaint must be made within six months out a contravention. This period may be extended by up to another six months, where there were exceptional circumstances preventing the claim from being made.


Enforcement II

The WRC may order payment of compensation as is reasonable in the circumstances, not exceeding the net amount of the wages. If the deduction is greater than the net amount of wages, it can order the employer to pay twice the deduction.

Non-payment may constitute a fundamental breach of contract amounting to constructive dismissal, in exceptional cases.  Parties may enter compromise agreement in respect of accrued rights, such as a settlement of entitlements.

If an employer overpays an employee, the general principles of restitution, apply.  The employer may not be able to recover if the employee, in reliance on the belief that the money is his, has in good faith altered his position and incurred costs. his must not be due to the fault of the employee.


Contractual Obligation

Generally, an employer is only obliged to pay an employee for work done.  There is no obligation to pay sick leave by law. The position is different, if a sick leave scheme applies. Its terms determine the position.

Usually, employers  allow  a few days of paid sick leave per annum, without legal obligation to do so. The same is true for most jority of other absences from the workplace.

An an employee is entitled to be paid during force majeure leave, up to  three days annually.

If the employer closes the workplace, there may be an obligation to pay. The employer prevents the employee from providing services. The employer might try to argue that the decision to close  was taken  to protect health and safety.


Bonus Scheme

The employee may have  a legitimate and reasonable expectation of a bonus in accrdance with a published bonus scheme or custom, even if it is discretionary by its terms. The use of the word “discretionary” is not always determinative of whether a contractual entitlement arises under a bonus scheme.
The extent of an employer’s discretion in relation to a bonus scheme is relevant to the determination of the question of whether, and, if so, to what extent the scheme has contractual content. The use of the term discretionary in a bonus scheme may apply to the decision whether to pay a bonus at all, its calculation or its amount. There  may be other factors to which discretion may apply.
The contract of employment and bonus scheme must be interpreted reasonably. The discretion may be readily interpreted so that it must be exercised reasonnably.

References and Sources

Payment of Wages Act 1991

Payment of Wages Act, 1991 (Commencement) Order 1991, S.I. No. 350 of 1991

Payment of Wages (Appeals) Regulations 1991, S.I. No. 351 of 1991