Five UK Pay Disputes and How to Resolve Them

Pay disputes rarely start as disputes. They start as a question in a one-to-one that nobody answers properly, and they end either in a grievance or in an employment tribunal claim. Pay is also the area where UK employers are most likely to breach a statutory duty without realising it, because most breaches come from how hours and deductions are treated rather than from the headline rate.

Here are the five pay problems that most often reach us, what the legal position is, and how to resolve each one.

1. Two people doing similar work, paid differently

An employee who discovers a colleague earns more for comparable work has two possible routes. An equal pay claim under the Equality Act 2010, if the difference relates to sex, and a discrimination claim on any other protected characteristic. Neither requires two years' service.

Resolve it by: documenting an objective pay framework. Bands by role, with defined progression criteria, and a written record of why anyone sits outside their band. A material difference is defensible when the reason is recorded and applied consistently. It is indefensible when the only explanation is that one person negotiated harder.

2. National Minimum Wage breaches nobody intended

This is the most common enforcement issue for small employers, and almost never a deliberately illegal rate. The usual causes:

• Unpaid working time: handover, opening up, mandatory training, travel between assignments
• Deductions for uniform, tools or equipment that take pay below the statutory minimum
• Salaried staff working consistent unpaid overtime, dropping the effective hourly rate below the floor
• Missing a birthday rate change, or an apprentice moving past the first year of the apprenticeship

HMRC can require arrears at current rates, issue a penalty and name the employer publicly.

Resolve it by: auditing actual hours worked, not contracted hours, against the current rates for every age band and the apprentice rate. Check every deduction from pay separately.

3. Holiday pay calculated on basic pay only

Holiday pay must reflect normal remuneration. For workers with variable pay, that generally means including regular overtime, commission and shift premia in the calculation, not just basic salary. The reference period for variable-hours workers is 52 weeks.

Resolve it by: identifying which elements of pay are regular for each role and rebuilding the calculation. If you use rolled-up holiday pay for irregular-hours or part-year workers, check that your arrangement matches the current rules, which changed for leave years beginning on or after 1 April 2024.

4. Unlawful deductions and unpaid final pay

Deducting from wages requires statutory authority, a specific contractual provision, or the worker's prior written consent. Common failures include recovering training costs, till shortages or notice not worked, without the clause to support it, and clawing back overpayments without an agreed repayment plan.

Final pay is a frequent flashpoint: accrued untaken holiday must be paid, and withholding pay pending return of equipment is not a lawful deduction unless the contract says so.

Resolve it by: putting an explicit deductions clause in the contract, and getting written consent for anything the clause does not cover. Handle overpayments as a conversation and an agreement, not a unilateral reduction.

5. Bonus and commission promises that were never written down

Discretionary bonuses attract more claims than contractual ones, because "discretionary" is often applied inconsistently. Where a bonus has been paid on the same basis for years, custom and practice can make it contractual in effect. Commission schemes commonly fail on what happens on termination, during sick leave, or when a client pays late.

Resolve it by: writing the scheme down: the measure, the period, the payment date, what happens to accrued commission on exit, and what happens during absence. If discretion is genuine, record how it was exercised each time.

What resolution actually costs

Issue	Typical fix	Cost driver
Pay structure and banding	Consultancy project, commonly £500-£1,500 a day	Headcount and number of roles
Minimum wage audit	Payroll or HR provider review	Number of variable-hours staff
Holiday pay recalculation	Payroll provider, often per payslip pricing	Pay frequency and variable elements
Contract and bonus clause drafting	Included in most HR retainers at £150-£600 a month	Whether documents are bespoke or templated

Handling a live complaint

1. Treat it as a formal grievance if the employee asks you to, and follow the ACAS Code of Practice.
2. Establish the facts and the calculation before responding, and put both in writing.
3. If you were wrong, correct it in the next pay run and say so in writing. Underpayments left unresolved become unlawful deduction claims, and a tribunal will look at the pattern across staff, not just the complainant.
4. Offer a right of appeal.

Getting the calculation checked by a payroll or HR provider before you reply is usually cheaper than the claim. Compare specialists via our payroll and employment law guides, or find providers near you in the city directories.

This guide is general information about UK pay compliance, not legal advice. Rates and reference periods change: check the current figures on gov.uk before acting.