Limits on Late Employee Payments: What UK Small Businesses Need to Know  

Summary

• Paying employees late in the UK is generally unlawful under the Employment Rights Act 1996 and may count as an unlawful deduction of wages. 
• Late payment can also breach employment contracts where payment dates are specified, exposing your business to claims. 
• The law applies to all wages, including salary, bonuses, holiday pay and sick pay. 
• This guide explains limits on late employee payments for small business employers in the UK, prepared by LegalVision, a commercial law firm that specialises in advising clients on employment law.
• It provides a practical explanation of legal risks, employee rights and when limited deductions or delays may be permitted.

Tips for Businesses

Pay employees on time and in line with agreed terms. Avoid delaying wages unless clearly permitted by contract. Communicate payment arrangements upfront and maintain accurate payroll systems. Even short delays can trigger legal risk, so prioritise wages and seek legal advice if cash flow issues arise.

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On this page

• What is the Law on Paying Wages?
• Can I Pay My Employee Late? 
• What Might My Employee Do if I Pay Their Salary Late?
• Key Takeaways
• Frequently Asked Questions

Paying employees late is not just poor practice; it can be unlawful under UK employment law and treated as an unauthorised deduction of wages. For your business, even short delays can trigger legal claims, breach contracts and damage trust, especially where cash flow pressures lead to repeated late payments. You must understand when late payment crosses the legal line and what risks arise if you get it wrong.  This article explains the legal limits on late employee payments and the consequences for small businesses.

What is the Law on Paying Wages?

The law concerning the payment of wages is in the Employment Rights Act 1996 (‘Employment Rights Act’). It details that your employees have a right to be paid. It also contains rules about the payment of wages, such as that you must:

• tell employees the date you will pay them; and
• let your employees know how you will pay them.

Can I Pay My Employee Late? 

Under the Employment Rights Act, it can be illegal for you as an employer to pay your employee’s salaries late. This includes whether it is a one-off late payment or occurs regularly. It also consists of all types of wages, so, for example, the law covers:

• salaries;
• commission;
• bonuses;
• one-off payments such as overtime;
• notice pay;
• holiday pay; and 
• Statutory Sick Pay (SSP).

Paying wages late means you have made an unlawful deduction of wages. However, the unlawful action may be justified if the salaries are only a few days late. 

Breach of Contract

Paying your staff late wages could also mean you breach your employment contracts. This will occur where it has a payment date clause or payment terms. This means that payments that are late and are not covered as unlawful by the Employment Rights Act can be a breach of contract, such as, for example:

• pensions;
• expenses;
• allowances;
• loans; and
• benefits.

Withholding Pay

Although paying your employees’ wages late is illegal, there are a few circumstances in which you can legally withhold their pay. This can only occur if your employee’s contract lists the instances when you may do so. For example, you may state that you can deduct wages where they make a mistake (although this is not good practice) or reclaim money where you overpaid them. However, times when you cannot withhold pay include:

• when your employee quits without notice; and 
• after terminating your employee’s contract.

What Might My Employee Do if I Pay Their Salary Late?

It is crucial that you try to avoid paying your employees late, but if you do find you have to, you should let them know as soon as possible.

If you pay your employees late, they will likely first speak to you about this to try to sort it out. Importantly, you should ensure that these discussions follow any applicable pay policies or guidelines that outline how to deal with late pay. Furthermore, where your employee cannot resolve the issue with you, they may file a grievance that you will have to deal with formally.

Ultimately, an unresolved late payment may allow your employee to take legal action and raise a claim with an employment tribunal. In addition, if not paying your employee on time constitutes a breach of contract, your employee could make a court claim for a contractual breach. If their case is successful, you could end up paying compensation of up to £25,000 in a county court.

2025 Key UK Employment Law Changes

This factsheet outlines key developments in 2025 affecting workforce management. In particular, the proposed Employment Rights Bill (2024) will drive significant changes, anticipated to start late 2025.

Download Now

Key Takeaways

Prompt payment of your employees is an essential responsibility you have as an employer. In failing to do so, you may be making an unlawful deduction of wages or breaching your employment contract. There may, however, be limited circumstances when you can withhold pay. If you pay your employees late and cannot resolve this, they can take legal action. This may be an employment claim in a tribunal, or a contractual claim in court against you.

If you need help navigating the risks of late payments to your employees, LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced employment lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.

Frequently Asked Questions