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Illegal pay deductions


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

The law is very clear about the circumstances in which an employer is permitted to deduct money for an employee's pay. Here is a 'must keep' summary of the law on pay deductions.


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.


Court and agency orders
Some courts are empowered to order employers to deduct money from employees' pay. This is known as a 'garnishee order'. In these circumstances, the employer receives a formal notice from the court or agency which explains the required deductions.


Some NSW awards and enterprise agreements permit employers to deduct money from an employee's pay for specific items provided to the employee.


Employee authorisation
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.

Employers are required to itemise all deductions made from an employee's pay on the employee's pay slip.


Deductions not permitted
Unless authorised by a law, court, award or agreement, the following deductions are not permitted:

  • the cost of employees' uniforms
  • shortages from cash tills or cash floats
  • training courses provided to employees
  • tools and equipment supplied to employees
  • the cost of damage to the employer's assets (including motor vehicles)
  • 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.

AMIEU Newcastle (02) 4929 5496


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