1. Introduction

The final pay calculation on termination of employment commonly gives rise to disputes. Outstanding salary, accrued but untaken annual leave, pay in lieu of notice, deferred bonus and commission, and benefit-in-kind reconciliations all fall within the definition of wages under the Payment of Wages Act 1991.

This article considers the principal elements of a final pay calculation, the rules on deductions for overpayments, and the practical issues that arise where the employer claims that the employee owes money to the employer.

2. Legislation and Case Law

Section 5(1) of the Payment of Wages Act 1991 prohibits deductions from final wages unless authorised by statute, by the contract, or by the prior written consent of the employee.

Section 5(2) permits deductions for overpayments of wages, errors in the calculation of pay, and certain advances on wages, but only where the deduction is fair and reasonable and where the employee has been given a written statement of the amount.

Section 23 of the Organisation of Working Time Act 1997 requires that, on termination, payment be made in lieu of accrued but untaken annual leave. This payment falls within the definition of wages under the 1991 Act.

Deductions for training costs, equipment, or other employer claims must be expressly authorised by the contract in writing. A general right of “set-off” is not sufficient to permit a deduction under Section 5. 

3. Decision

The WRC will examine the final payslip against the contractual and statutory entitlements. Where elements have been omitted (such as accrued leave) or under-calculated (such as commission earned but not yet payable), the WRC may find unlawful deductions.

Where the employer has deducted sums for overpayments, training costs or other claims, the WRC will examine the contractual authority for the deduction, whether it complies with Section 5(2), and whether prior written notice was given.

Compensation covers the unlawful deduction. Where the employee has suffered consequential loss (for example, interest on unpaid sums), the WRC’s jurisdiction is limited to the amount of the deduction itself.

4. Takeaway

Employers should prepare a written final pay calculation setting out all elements and provide it to the employee with the final payment. Any deductions should be expressly identified, with reference to the contractual basis.

Employees should not sign termination paperwork that releases all claims without first verifying the final pay calculation against the contract and statutory entitlements. Once a settlement agreement is signed, it may be very difficult to revisit underpayments.

5. Further information

This article was prepared for informational purposes only. For further advice, please email enquiries@crushell.ie or contact the offices of Crushell & Co Solicitors.

6. About Crushell & Co

Crushell & Co is a specialist law firm focused on protecting and advancing the rights of employees in Ireland. We offer a nationwide service, advising individuals on a wide range of legal and regulatory issues arising at work, including employment law, employment immigration and workplace accidents and injuries.

We help employees understand their position and options by translating complex legal issues into clear, practical advice. Our approach is tailored to each client, ensuring that our strategy is aligned with their personal and professional circumstances.

Connect: @CrushellLaw or www.crushell.ie