Ridge v Her Majesty's Land Registry (Contract of Employment : Itemised pay statement)

An employer which reduces wages payable for a current pay period in order to recover an overpayment made for an earlier period makes a deduction for the purposes of section 8 of the Employment Rights Act 1996. The itemised pay statement must identify both the amount and purpose of that deduction.

By contrast, a lower gross amount which reflects unpaid absence in the current pay period is part of calculating pay due for that period. It is not a deduction requiring separate identification. The statutory requirement is to give a clear broad outline of how pay is made up; it does not require exhaustive calculation detail.

The claimant, a software engineer employed by HM Land Registry, had periods of sickness absence after exhausting his entitlement to full sick pay. Where absence was processed late, his later payslips contained minus entries under basic pay and IT allowance to recover earlier overpayments. The entries did not state their purpose.

An Employment Judge at the Exeter Employment Tribunal dismissed his claim under section 11 of the Employment Rights Act 1996 and awarded the respondent £500 costs. The judge treated the entries as variations in gross pay rather than deductions.

The claimant appealed. The central issue was whether recovery of a prior-period overpayment was a deduction whose purpose had to appear on the itemised pay statement.

1. Appeal allowed in part. Recovery from current salary of an overpayment made for an earlier pay period is a deduction for the purposes of section 8 of the Employment Rights Act 1996. The employer must state the amount deducted and identify its purpose on the relevant itemised pay statement.
2. The purpose of an itemised statement is to enable an employee to see, at a glance and in broad outline, how the payment is made up. It requires gross pay, net pay, and the amount and purpose of deductions. It does not require a detailed breakdown of every calculation.
3. The natural meaning of gross salary does not encompass a sum reduced to recoup an earlier overpayment. The conclusion was also supported by section 14(1), although that provision governed a separate statutory right: its express exception for reimbursement of overpayments indicated that such reimbursement would otherwise be a deduction from wages.
4. The minus entries were separately identifiable deductions, but the minus sign did not identify their purpose. Abbreviated wording indicating recovery of an overpayment would have sufficed. Conversely, reductions reflecting unpaid absence within the pay period for which wages were being calculated were not deductions; they were part of calculating the gross pay then due.
5. The claimant was entitled to a declaration under section 12(3)(b). The costs order was set aside because the claim was not misconceived. No remission or award under section 12(4) was appropriate. The claimant knew the purpose of the deductions before commencing proceedings, did not contend that they were inaccurate, and a monetary order would have been disproportionate. The limited declaration was a sufficient remedy.

• Employment Appeal Tribunal: Allowed the appeal in part, declared that the payslips lacked particulars required for the prior-overpayment deductions, and set aside the costs order.
• Employment Tribunal, Exeter: On 8 December 2009, dismissed the section 11 claim and ordered the claimant to pay £500 costs.