Can an employer make deductions from an employee’s pay?
Under the Fair Work Act 2009 (Cth), an employer cannot unilaterally deduct amounts from an employee’s pay without the employee’s permission. Deduction of an employee’s pay must be for the employee’s benefit and is agreed in writing unless such deduction is allowed under the Award, Court order, or a Fair Work Commission order.
Examples of circumstances money can be deducted from an employee’s pay
- salary sacrifice arrangements;
- voluntary contributions into an employee’s super fund.
What should be entailed in the written agreement for deduction?
A written agreement for pay deduction must specify the following:
- the amount of deduction;
- the purpose of deduction;
- the date the deduction is to be made;
- how frequently the deduction is to be made;
- to whom the deduction is to be given.
What if I mistakenly overpay my employee?
When overpayment occurs, the employer and employee should discuss and agree on a repayment arrangement. The agreement should be made in writing and must set out the:
- reason for the overpayment;
- amount of money overpaid;
- methods for repayment (cash, cheque or electronic transfer); and
- how often will the repayment be made (the frequency of repayment has to be reasonable).
If a repayment arrangement can’t be agreed on, or if there is uncertainty regarding whether deduction from the employee’s pay is authorised, please contact ECA Legal for legal advice on your specific circumstances.
Disclaimer: This summary is a guide only and is not legal advice. For more information, call ECA Legal on 6241 6129 or email ecalegal@ecawa.org.au
