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True or False – you can deduct money from employees wages

Modern AwardsApril 28, 2016

(Last Updated On: August 9, 2016)


Whilst this is true, deductions from an employee’s wage is only allowed under the Fair Work Act (the Act) if they are ‘permitted deductions’.

The Act allows an employer to deduct amounts from an employee’s wages if the deduction is authorised in writing by the employee, or if it is authorised in accordance with Modern Awards, any other employment agreement, or under a specific order of a court or the Fair Work Commission.

The authorisation provided by an employee must be in writing and specify the amount of the deduction or any variation to the amount. This authorisation can also be withdrawn in writing by the employee at any time.

Examples of deductions that could be a breach of the Act.

Deductions that are likely to be unlawful include:

  1. deductions to cover shortages from tills or cash floats
  2. cost of damages to the employer’s assets, including motor vehicles
  3. cost of breakages or accidents by employees
  4. cost of an employee’s uniform
  5. deductions from wages due to lateness

Even if the employee agrees in writing, such deductions are likely to be considered for the benefit of the employer and deemed unlawful.

What can be done if an overpayment occurs?

The employer may seek recovery of an overpayment through negotiation and agreement in writing with employee. The employee must be given a choice about how the money is to be repaid, and the amount and frequency of each deduction.

If an employee refuses to enter into an agreement for repayment, the employer will need to take independent action.


Prior to negotiating or implementing any deductions, seek advice on how best to manage this as The Act only permits deductions under limited circumstances. Employsure can assist with ways to manage this process, ensuring it is in-line with your employer obligations. Call 1300 651 415 to find out more.

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