What can you deduct from employees’ wages?

Hefty penalties and fines can prevail if an employer deducts money from an employee’s wages.

In the absence of any law, term in a modern award, or an enterprise agreement (if reasonable), the only scenario is where you have the employee’s written authority and it is principally for their benefit.

The authorisation must also specify the amount of the deduction and may be withdrawn in writing by the employee at any time.

Just because you have a written agreement doesn’t mean this will be lawful in all circumstances. Deduction terms have no effect where they are directly or indirectly for the benefit of the employer.

Further, the Fair Work Act restricts an employer from requiring an employee to spend an amount of money in relation to the performance of work if the requirement is unreasonable in the circumstances.

For example, where an employee is directed to attend a training course, the cost of the training should be borne by the employer as it benefits the organisation and relates to the performance of work.

Where an employee makes a request that the employer pay for a training course directly to a training provider and then make deductions from their pay over an agreed period, this would satisfy the provision of being authorised in writing and for the employee’s benefit.

Should an employer unlawfully deduct an amount from an employee’s wages they face underpayment claims and the risk of penalties of up to $63,000 for the company and $12,600 for the individual per breach.

For further information about permitted deductions please contact the Employee Relations Advice Centre on 9365 7660 or [email protected].

CCI’s Business Law WA can also assist with the drafting of contract terms and permitted deduction agreements, please contact the Advice Centre for further information on this service.

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