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Deductions from pay.

Deductions from pay.

Taking money out of an employee’s pay is called a deduction. There are clear limits to when you can deduct pay and when you cannot.

Employers can only make deductions under one of the following conditions

  • the employer and employee agree in writing and it is for the employee’s benefit
  • the award or agreement allows
  • another law permits deductions

, for example, salary sacrifice or payments into their health fund. You can also deduct pay if it is allowed by an agreement, award, court order or the Fair Work Commission. Always show deductions on the employee’s pay slip and wages records.

You are not allowed to deduct pay if it only benefits the employer or is unreasonable, for example, making up for the till being short by taking it out of an employee’s pay. You also cannot deduct pay for employees under 18 unless their parent or guardian has agreed in writing.

One common wrong reason for deducting pay (unless allowed under an agreement, award or court order) is to fix up a mistake or overpayment. In this case, you need to discuss and agree on a written repayment arrangement with your employee first. Another common reason is when an employee damages company property. In this case, it is much safer to seek advice than to go ahead and deduct pay.

Employsure advisers will help you with the proper process for making deductions from pay. For peace of mind, please call our 24 hour Advice Line now on 1300 651 415.

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