Final Pay and Deductions

Your final pay packet should include all amounts you are owed at the time your employment ends. This typically covers:

• Outstanding wages: All pay earned up to and including your last day of employment
• Notice pay: Your contractual or statutory notice period, unless you have been paid in lieu (PILON) or were dismissed for gross misconduct
• Accrued holiday pay: Payment for all annual leave that has accrued during the current leave year but has not been taken
• Commission and bonuses: Any sums that have been earned or that you are contractually entitled to — even if the payment date falls after your last day
• Expenses: Any outstanding business expenses you have incurred and submitted
• Redundancy pay: If applicable, though this is often paid separately

Final pay should be made on your regular pay date. If your employer fails to pay on time, this constitutes an unlawful deduction from wages and you can raise a claim.

Employers cannot deduct money from final pay simply because they want to. Under the Employment Rights Act 1996, deductions are only lawful if:

• They are required by law (e.g. income tax via PAYE, National Insurance contributions)
• There is a written contractual provision expressly permitting the deduction (e.g. a clause allowing the employer to recover training costs if the employee leaves within a set period)
• The employee has given their prior written consent to the specific deduction

Deductions employers commonly try to make on leaving — which may or may not be lawful — include:

• Repayment of training costs: Lawful only if there is a clear contractual repayment clause signed before the training took place
• Overpayments: An employer can recover a genuine overpayment, but must do so reasonably — not deducting in a way that causes serious financial hardship without notice
• Company property: Employers cannot deduct for missing equipment unless there is a specific written agreement
• Garden leave or working through notice: An employer cannot reduce pay during a valid notice period

When your employment ends, you must be paid for all statutory holiday that has accrued in the current leave year but not been taken. The accrual is calculated up to and including the last day of employment.

For example, if the leave year runs from January to December and you leave in April, you will have accrued approximately 4/12 of your annual entitlement. If your employer's leave year started in January and your entitlement is 28 days, you would have accrued around 9 days. If you had taken 5 days, you would be owed 4 days' holiday pay.

If you took more holiday than you had accrued by your leaving date, your employer may be able to deduct the overpaid holiday from your final pay — but again, only if there is an express contractual provision permitting this.

Holiday pay on leaving is calculated on the same basis as regular holiday pay — reflecting your normal remuneration, including regular overtime and commission, over a 52-week reference period.

Your employer must give you a P45 when your employment ends. This document shows your total earnings and tax paid in the current tax year and is required by your new employer to ensure your tax code is correct. Your employer cannot legally withhold your P45 — if they do, contact HMRC directly for a replacement.

You should also receive a final payslip showing all earnings and deductions for your last pay period, just as you would for a normal month. If your final pay includes multiple components (e.g. notice pay plus accrued holiday), each should ideally be itemised on the payslip.

Keep copies of all payslips, your P45, and any correspondence about final pay. These are essential if you need to challenge an underpayment at a tribunal or make a complaint to HMRC.