What employers need to know before responding to the request to donate Shs 10,000 from the employees’ May and June Salaries

On 17^th May 2020, the Chairman Fundraising Subcommittee National Response Fund to Covid-19 Mr. Patrick Mweheire, appealed to the 1.5 million formally employed workers, through their CEOs to donate about Shs 10,000 each for the months of May and June as a donation to the struggle to combat the pandemic in Uganda. The assumption behind the drive is that over Shs30 billion would be collected from the workers and channeled to efforts to procure personal protection gear, testing kits and support materials for medical teams on the frontline. While this seems like creative thinking by the Chairman, reactions from social media indicate that Ugandans are displeased, irritated and prepared to fight the Government from interfering with their money. Platform for Labour Action has examined the Employment Act 2006 and answered some of the pertinent questions regarding deductions from employee’s wages.

What is the legal position on payment of wages? 

Generally, the law states that except where it is expressly provided by law, no person may receive the wages due to any employee on behalf of that employee without the written permission of the employee to whom the wages are due. (section 44) of the Employment Act 2006).

What are wages?

According to the Employment Act, wages mean remuneration or earnings, however designated or calculated capable of being expressed in terms of money and fixed by mutual agreement or by national laws or regulations, which are payable under an oral or written contract of service for work done or to be done, or for services rendered but excluding any contributions made or to be made by the employer in respect of his or her employee’s insurance, medical care, welfare, education, training, invalidity, retirement pension, post-service gratuity or severance allowance (section 2).  A deduction from a wage would therefore mean an employee receiving less than the agreed net-pay excluding all the statutory deductions.

What is the legal principle on deductions from an employee’s wages?

It is unlawful for an employer to make a deduction from employee’s wages unless such deduction is done in conformity with the labour laws and regulations.

When can an employer lawfully deduct wages?

An employer can lawfully deduct from an employee’s wages where;

1. The deduction is required or authorized by law
2. There is a provision in the worker’s contract; or
3. The worker has given their prior written consent to the deduction.

What deductions are permitted by law?  

Section 46 (1) of the Employment Act (2006) provides that the following deductions from remuneration due to an employee are permitted (a) an amount in respect to any tax, rate, subscription or contribution imposed by law, (b) where the employee has previously given his or her written consent to a deduction being made, the deduction being in respect of any amount representing a contribution to any provident or pension fund or scheme established or maintained by the employer or some other person, (c) deduction by way of reasonable rent or other reasonable charge for accommodation provided by the employer for the employee, or the employee’s family, where the employee has agreed to the deduction, and (d) union dues. This means that the employer is only permitted to deduct PAYE and related taxes, NSSF contributions and any other contributions imposed by law including union dues where the employee belongs/subscribes to a particular labour union. Any other deductions have to be authorized by the employee by way of consent. However, attachment of wages is permitted as long as the attachment does not exceed two-thirds of all the remuneration due in respect of that pay period (section 46 (3)

What is the legal position on unauthorized deductions?

Section 45 (2) of the Employment Act 2006 provides that no deduction shall be made from the wages of an employee with a view to ensuring a direct or indirect payment to his or her employer or the employer’s representative or any intermediary for the purpose of obtaining or retaining employment. This means that the employer is not allowed to pay to himself or any third party any amount from the employee’s wages for purposes of securing or obtaining employment.

Are there consequences for un-permitted deductions?

Yes, an employer who acts in contravention of the provisions is liable to repay any remuneration wrongfully withheld or wrongfully deducted from the employee. (section 47)

How can an employee recover money that has been wrongfully deducted?

An employee can make a request for repayment to a labour officer not later than six years after the alleged deduction. The worker can seek a declaration from the labour officer that there was deduction and the labour officer seeks for payment or repayment of the unlawfully deducted amount and in some circumstances, unlawful deduction of wages compensation for further financial loss.

Who is protected under the unlawful deduction provision.

The law applies to all employees employed by an employer under a contract of service, an apprenticeship contract including, without limitation, any person who is employed by or for the Government of Uganda, including the Uganda Public Service, local authority or a parastatal organization but excludes member of the UPDF.

A contract of service is an agreement (whether orally or in writing) binding on parties who are commonly referred to as “employer” and “employee”. For example, a customer service consultant working in a telecommunications company. It was held in Stevenson, Jordan Harrison Ltd v MacDonald & Evans [1952] 1 TLR 101 that a person is considered an employee under a “contract of service” when the work is integrated in that of the business and considered an integral part of the business, whereas an independent contractor for services is merely an accessory to the business and, thus, not an employee. 

What would be the right way to do this?

The Government should remember that employers are not legally authorized to comply with the request to deduct the shs 10,000 from employee’s wages/salaries for the months of May and June as proposed by the Fundraising Subcommittee National Response Fund to Covid-19 Chairman. Employers are limited in their mandate and cannot be seen intermeddling with what contractually and legally does not belong to them. The power and control over wages are vested in the workers and not the company CEOs as suggested. Employers should remember that any move to deduct a single penny from an employee’s net-pay/salaries or wages will lead to legal action for recovery or repayment. The appeal should be channeled to the workers who should be given scope to determine whether their respective earning allow room to make the shs. 10,000 donation. It would be dangerous to assume that all the 1.5 million workers earn enough money to forego the stated amount especially during a time when they are uncertain about job security and ability to fulfill other financial obligations.