11 November Deductions from an employee's pay November 11, 2019 By Reef Admin General 0 When it comes to deductions from an employee’s pay, what’s allowed and what’s not? What amounts can an employer take out before it hits an employee’s hand? In general, an employer is prohibited from making any deduction from an employee’s wages without the employee’s specific authority. Even with authority, a deduction can only be made for the purpose of paying a third party for the benefit of the employee. The Fair Work Act 2009 provides that an employer may deduct an amount payable to an employee if: the deduction is authorised in writing by the employee and it is principally for the employee’s benefit; the deduction is authorised under a modern award or enterprise agreement; or the deduction is authorised by a federal, state or territory law, or by an order of the court. If the deduction is authorised in writing by the employee and is principally for the employee’s benefit, then it doesn’t have to be authorised by an award or agreement. The authorisation must also specify the amount of the deduction and may be withdrawn in writing at any time. Unreasonable deductions Common examples of deductions from an employee’s wages by an employer that may breach the Fair Work Act include: The cost of training courses provided to an employee where they are directed to attend by the employer The cost of tools and equipment supplied to the employee for work-related use The cost of damage by an employee to the employer’s property (e.g. motor vehicles) The cost of breakages or accidents by employees The cost of employees’ uniforms Fines imposed by an employer for breach of company policies or practices (e.g. for lateness) Compensation as assessed by the employer for an employee misdemeanour. While there may be an opportunity for an employer to recover certain sums of money through civil action in a local court (e.g. for damage to company property), legal advice should be sought before taking such action as the costs associated with recovery may well outweigh the return. Permitted deductions There are some obvious deductions that are permitted, including: Income tax deductions Money deducted pursuant to a garnishee order from a court Deductions authorised by employees, such as insurance premiums, union dues and loans payments Salary sacrifice payments. It’s worth noting that it may be acceptable in some circumstances to deduct payments for the time not worked when an employee does not present for work at the designated starting time. This is in contrast to imposing a fine for lateness. Give REEF a call If you’re contemplating deducting an amount of money from an employee’s pay (other than those items set out above), please speak with a REEF Workplace Relations Advisor before doing so. Call 1300 616 170. Related Ask an expert: Deducting a PI insurance excess from an employee's wages What if an employee's conduct results in a claim against the agency's professional indemnity insurance policy? Can the amount of the excess be deducted from the employee's wages? Employee deductions: What's allowed, what's not To deduct or not to deduct? When it comes to deductions from an employee's pay, what's allowed and what's not? What amounts can an employer take out before it hits an employee's hand? Protecting confidential information from employee theft As agencies have come to rely more and more on technology, there's been an increase in employees taking important and confidential business information. How can I restrain an ex-employee's conduct? It’s a common misconception that a post-employment restraint in an employee’s contract of employment isn’t worth the paper it’s written on. But the absence of a restraint leaves you with very limited opportunity to restrain an ex-employee's objectionable conduct. Challenging an employee's post-employment conduct Before challenging a former employee's post-employment conduct, you have to be sure your own house is in order. One employer found out the hard way. A message from the CEO: Stay up to date to stay compliant Compliance. It's a word that strikes fear into the hearts of many employers. But it goes hand in hand with running an agency – and now with the start of the new Real Estate Industry Award, it's never been more important. Comments are closed.