Rights & Responsibilities

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Illegal Pay Deductions

When can an employer deduct money from an employee's pay?

Deductions may be required by law

Some laws require employers to deduct money from employees' pay. The most obvious example is the requirement under Federal income taxation laws to deduct income tax instalments from employees' remuneration.

Courts and agencies may order pay deductions

Some courts are empowered to order employers to deduct money from employees' pay. This is known as a 'garnishee order'. Some Federal agencies, including the Child Support Agency can also order an employer to deduct money from an employee's pay. In these circumstances, the employer receives a formal notice from the court or agency, which explains the required deductions.

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Awards may permit an employer to deduct pay

Some NSW awards and enterprise agreements permit employers to deduct money from an employee's pay for specific items provided to the employee. Common circumstances include the costs of accommodation/lodging or services provided to the employee.

Employers should contact the Office of Industrial Relations on 131 628 to check whether the relevant award allows deductions.

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Where the employee authorises the employer

An employee may authorise an employer to deduct money from his or her pay. However, this must be done in writing and the deduction must relate to a payment that is principally for the benefit of the employee.

Remember, employers are required to itemise all deductions made from an employee's pay on the pay slip given to the employee!

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Common types of deductions which are not permitted

Each year, the Department of Industrial Relations receives hundreds of complaints about employers making unauthorised deductions from employee's pay packets.

Unless authorised by a law, court or industrial instrument, the following deductions are not permitted to be made for:

• the cost of employee's uniforms
• shortages from cash tills or cash floats
• training courses provided to employees
• the cost of mobile telephones provided to the employee for work-related use
• tools and equipment supplied to employees
• the cost of damage to the employer's assets (including motor vehicles) and
• the cost of breakages or accidents by employees.

The maximum penalty for an unauthorised deduction from an employee's pay under the Industrial Relations Act 1996 is $11,000.

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Examples of iIlegal pay deductions

The OIR has recently resolved a number of complaints from employees regarding illegal deductions.

• An OIR inspector helped an employee of a Merriwa farming company recover $3,553 illegally deducted from his termination pay. Under duress, the employee had signed a form allowing deductions for a Stock and Station Agent's Certificate, including amounts for course fees, books and accommodation.
  
  
• A plant operator for an excavation company at Forbes was reimbursed $1,750 for a number of illegal deductions from his wages to pay for servicing and replacement parts for the equipment he was operating.
  
  
• A supervisor working under the Metal and Engineering (State) Award in Matraville received $1,886 for wages and holiday pay that was deducted illegally from his termination payment.
  
  
• A 16 year-old female shop assistant in Wagga Wagga received $115 for reimbursement of uniform purchase.
  
  
• A casual medical receptionist in Sydney's eastern suburbs received $401 from her former employer from Eastlakes for the cost of uniforms.
  
  
• A security guard employed by a North Sydney security company was repaid $250 after this money was illegally deducted from his wages.