Is it legal to withhold a terminated employee’s pay?

Friday February 7 2020


By Moses Ssesanga

My responsibility is to generate monthly payrolls and ensure accurate deductions. In case of staff exits, terminal payments can only be effected once a staff member produces a fully signed clearance form. Staff Y who held a managerial position, refused to return some company’s asset, claiming the company had not fully paid up the service provider, he would take responsibility and clear the remaining debt, meaning he will eventually remain with the company asset.

I have been forced to hold the salary until the clearance has been fully made, which by the way, is clear in our HR manual. Is this an illegal move?
Liliane Ntege

Dear Liliane,
The Employment Act of 2006 protects the employee’s salary and benefits and this even becomes critical during separation, when the employee decides to leave employment, whether voluntarily or compulsorily. Carefully observe the law, especially in cases of compulsory termination of services.

This is when cases end up in labour court for arbitration, and in most cases, the employer loses because of insisting on implementing the company’s HR manuals that contradict the Employment Act. However, the employer is also protected by the same Act.

Section 46 (1) a-d of the Act, however, stipulates permitted deductions from an employee’s pay. These include the statutory taxes as imposed by law; situations where the employee has previously given his or her written consent to a deduction being made, in respect of any amount representing a contribution to a provident or pension fund or scheme established or maintained by the employer; or deduction by way of reasonable rent or other reasonable charge for accommodation provided by the employer for the employee, or the employee’s family, or where the employee has agreed in writing to the deduction and finally, the trade union dues, where they apply.

This implies that deductions outside those outlined above are non-permissible under the law. You are, therefore, advised to check or seek legal advice before you withhold the employees terminal benefits.


Moses Ssesanga
Head Human Resource
NMG - Uganda