75

I have been recently offered a new job (software development, permanent, UK) after successful interviews, everything has seemed fine up until one point raised in the offer email which strikes me as peculiar

Your first month's pay will have a deduction of 1 week's pay to be held by us and paid back to you if you leave the company

I queried this and was informed that this is a standard policy across their business as a "safeguard for when employees leave and have overtaken on holidays or leave at the end of a month", and so I will effectively never receive my first week's pay unless I quit.

This is my first successful application for a job in the private sector, having worked public sector my entire career to date, so I'm unsure if I should consider this a red flag, or if its just a fairly standard industry practice I'm unaware of.


I raised it again with the employer and they have confirmed it is indeed a week in arrears, not a week's salary indefinitely withheld to be eventually repaid (at original value) when I may one day leave.

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  • Are you actually starting on the first day of the salary-month? Presumably everyone in the company gets paid at the same time, so if you're starting mid-month, you would get less. I've never heard of this as you describe it though (UK). – Steve Smith May 15 at 12:50
  • @paul: Under your claim, if OP receives raises during his/her employment, then the payment for that first week would also be raised. However, what you describe is in accord to what some answers claim would be the "company's claim in court", but not with the notion described by OP's question which claims the first weekly payment is effectively withheld. – Mefitico May 15 at 13:11
  • @Mefitico If you get paid at the end of the month for each month's work (normal in salaried employment), then at an average moment in the course of your employment you have not yet been paid for half a month (just over two weeks) of your labour. Yet nobody protests that this is a great injustice and they should be compensated with interest for inflation. This company's policy increases the average amount of not-yet-compensated labour from just over two weeks to just over three weeks - an increase of less than 50%. Why should that change anything? – Mark Amery May 15 at 13:49
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    @MarkAmery: I see your point, but over the course of a month the salary should be the agreed upon value, hence why protesting the inflation correction over this short span is unreasonable. My point is: Let's say starts OP with a weekly salary of 1000 monetary units. When he leaves after 10 years of labour, his now weekly salary is 2000 monetary units. Does he (case1) receive 1000 units as the payment for that first week or (case2) does he receive 2000? In case1, his first salary was effectively withheld as a colateral. In case2 the lask week is indeed just being rolled over to the next month. – Mefitico May 15 at 14:10
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    A few decades ago, the State of Nebraska got the brilliant idea that if they paid wages two weeks after they were earned, there would be a one-time income boost of several million dollars. So if you took a state job, it was 6 weeks before you got any pay. Yes, after you quit, you still had two more checks coming, but if you wanted to eat food and pay rent during your first 6 weeks of employment, you'd better have some savings. I think the practice is despicable. Make the poor guy take all the risk, while the multi-billion dollar entity covers takes none. – B. Goddard May 16 at 15:49
63

This is quite normal practice in the UK, even if I never experienced it in the IT world.

Many companies like Tesco and any of the supermarkets will do this.

It may not have been properly explained to you as "withholding" might sound odd, you are paid in arrears with an outstanding week to be added at the end of employment, makes it easier for you at the end of employment but not at the beginning.

If you think about it, you have always been paid for work you haven't done yet (likely), if you are paid on the 25th,28th of the month, this is a few days before the end of the month but you still get paid until the end of the month, any days off unpaid you may take on those days will only be reflected the following month, this is sort of the same.

You're fine, don't worry and enjoy the new job!

43

I can find no evidence that this is illegal or widely considered disreputable. Acas explicitly describes a practice that is almost identical:

Working a 'week in hand': This means a worker receives their week's wage the week after it was earned. For example, if a worker begins a week's work on 1st January and is paid weekly, they would get paid for that week on or before the 14th January not the 7th January. If you use this system then when a worker leaves, they will be entitled to the week in arrears in their final pay.

I've never personally encountered this, and it may indeed be rare in salaried employment, but the fact that a pseudo-government source simply describes the practice in matter-of-fact terms in its advice for employers, without any hint that it's a thing they shouldn't do, suggests to me that it's not a red flag. If nothing else about this company is worrying you, I wouldn't be concerned.

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    Your quote applies to situations where the worker is payed weekly, but the OP is paid monthly. Does your source address that, as it's rather different? – Chris H May 16 at 8:38
  • @ChrisH I concede that it's a somewhat different situation. No, the source doesn't specifically address the case of being paid monthly with a week in hand. – Mark Amery May 16 at 10:46
27

Yeah that's not really what I'd call normal - it's legal because they are essentially operating a payroll system where you work a week in hand. Normally where this in place it goes with weekly payroll, they are operating payroll monthly while also having a "week in hand" - That's highly unusual in salaried environments - it's done for the reasons they say but is much more common in seasonal and retail environments where they have high staff turnover and are looking to avoid having to try and recover monies owed from staff.

Personally I would consider it irritating but wouldn't go so far as to call it a deal breaker. Assuming the company itself doesn't fold you'll be getting that money one way or another eventually but it's poorly worded (which would probably assist you if you ever came to a legal dispute over it in the future).

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    No, it's only legal because its a clause in the contract and/or the employee has previously agreed to it; the payroll system is irrelevant. It sounds like they've been burned in the past by either allowing someone more holiday than they had earnt and that person then left, or they overpaid and then terminated someone. Either circumstance does not grant any right to garnish wages/salary - they lose. – Justin May 15 at 11:03
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    @Justin I hadn't worded that very well, as you say payroll period length is irrelevant to whether they can operate a "week in hand" system, it's just highly unusual to see in a monthly salaried job. You're wrong in the second half of your comment though - they aren't garnishing wages and they are entitled to take over-used holiday allowance out of wages held in hand – motosubatsu May 15 at 11:33
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    @Justin in many European countries, and I expect UK to be no different, certain contract terms are considered unfair and are void even if put in contract and employee agreed to it. If that thing would be considered illegal in UK, putting it in contract wouldn't make it legal. – Mirosław Zalewski May 15 at 23:38
  • @MirosławZalewski - The UK has "unfair" terms too, although in this case the withholding of 1st week's pay falls inside the legislation (gov.uk/understanding-your-pay/deductions-from-your-pay). You're correct that if a clause is unfair (or breaches statutory employment legislation, which overrides any employment contract in the UK) it would be void. In a commercial contract, this would actually void the entirety of the contract unless all parties agreed otherwise - I've never thought to find out whether this holds true for employment contracts. – Justin May 16 at 11:03
  • Because this is usually used in high-turnover/seasonal work wouldn't that be a red flag for a salaried place? I would think it would scream "don't work here because we are constantly expecting you to leave and will treat you like it." – IT Alex May 16 at 12:31
10

I've been in the UK job market for about 30 years (school/uni/work).

This used to be relatively common, it's called Payment in Arrears

As they say when you start you miss the first pay as you were paid a pay period behind (and if you were salaried that could be a month's pay) and got it after you left.

Now usually this wasn't really an issue as everyone did it, so at your very first job you'd have to survive pay 1, but as long as you moved directly from one job to the next you'd never be without (the first pay you didn't get in the new job would be covered by the last from the old job). You would have to remember the lag when you were waiting for overtime payments etc.

It could be quite fraught if you left on bad terms or there were problems in the company as you'd be waiting to see if you got your due.

Some point in the 90s companies started paying for the current period, likely as they now had software for payroll so didn't need the time to process deductions.

Likely this company is outsourcing payroll and has been hit by (as they say) people overusing holidays and leaving owing money that they cannot recover from unpaid salary without delaying payment.

So, not unusual but maybe a red flag about how the company works and the staff turnover.

5

As mentioned in the comments, this is something that does show up on some contracts but it is not the standard, to answer your specific question.

Due to the simple wording you provided, that may be inline to what is in your contract, it may be more or less bearable. If I were you, I'd specifically ask if this pay will go up with inflation or if it will be equivalent to a week's salary at the point where you leave the company (rather than your starting salary). If possible, negotiate for better wording of this term in your contract should the answer to these questions be positive. If it isn't positive, then you should re-evaluate whether the benefits of this position overcome this disadvantage. If you're in no position to reject, then you got no choice but to take it.

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4

This is not really as complicated as everyone is making it. It's really a simple matter of being paid for the work you've done, plus the payroll processing time...and it works the same way in the U.S. where I work.

Let's say your employer processes weekly payroll and payday is Friday. The payroll person, or team, also works Monday-Friday, so on Monday they begin processing the pay for hours worked in the previous week. That process takes a non-zero amount of time and effort, perhaps a fair amount of effort depending on the complexity of the company. They push all the necessary buttons, send the request to accounting, who in turn has to write the checks or process the electronic payments, which will be distributed on payday (the following Friday). Hence, you receive your pay a week after the last day worked in your one-week pay period.

Same thing happens for longer pay periods. I'm paid every two weeks (and have been throughout most of my professional life). My pay comes the week after the closing of the two-week pay period, for precisely the same reason ... that payroll has been processing my pay and that of all my colleagues during the week following the close of my worked pay period.

Nothing complex or nefarious going on here, just an unfortunate choice of words by whoever explained it to you in the first place.

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-4

It might even be illegal, but it is surely not common.

If they keep your money, they will have to provide interest, compensation with inflation and other benefits, as those money sit in their account, not in yours.


Note: the situation is the norm in some jobs, especially where people have to handle money or other valuables (cashiers, accountants...), as a deposit in case the employee makes some mistake and has to pay back the missing money. But in software development...

  • 1
    very legal, very easy to frame as "paid in arrears" and very common. You are paid for 1 month at a time, they can claim cut off for payments is on the 23rd (for example) and therefore they are paying you for the first week of work you are doing on your first payment, they are just not paying you for the last week of the month, which rolls over every month. It is just a matter of perspective – fireshark519 May 15 at 10:16
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    According to the words of the question, that is not the case. The OP seems to have been informed about a different approach, even if they seem to function similarly. The "1 week's money" is to be paid when leaving the company, not at the end of every month. – virolino May 15 at 10:19
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    yes, but you are querying the legality, the reality is that they explained it functions this way but they could always present in court a different way, just this is what they use as an explanation. And either have the same outcome – fireshark519 May 15 at 10:40
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    Well, I expect that what they said is what it is written in the contract. Otherwise, the OP is entitled even to sue them. – virolino May 15 at 10:42
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    This is 100% common in any field, as for cash handling fields they tend to just remove the money from this months paycheck directly – Twyxz May 15 at 12:12

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