At HR Gurus, we often get asked the question can I make automatic deductions from my employees pay?  It can get confusing sometimes around what the circumstances have to be to allow you to make deductions from your employee’s wages especially when it is to recover monies owed to you.

Under the Fair Work Act 2009 (Cth) (Act), amounts payable to an employee in relation to their work performance must be paid at least monthly and in full.

The Act specifies certain provisions regarding the circumstances of when an employer may make deductions from an employee’s wage or salary.

Section 323 of the Act requires an employer to pay an employee amounts owing to them in full in relation to the performance of work, except as provided for in section 324 of the Act.

Sections 324(1)(a) of the Act provides that authorised deductions may be made from an employee’s wage/salary, incentive based payments, bonuses, allowances if the deduction is authorised in writing by the employee and the deduction is principally for the employee’s benefit such as a salary sacrifice arrangement.

Section 324(1) of the Act also permits the employer to make deductions if it is authorised in accordance with an enterprise agreement or under a modern award.

Although many business owner’s will add a clause into contracts of employment allowing them to make deductions.  Such terms do not comply with section 324 of the Act.  You may find yourself in hot water if the employee later disputes the deduction.  You will not only have to repay the monies deducted but may also face penalties.

The same goes for overpayments.  If you accidently over pay an employee surely you can deduct the amount from the next pay cycle, right? Wrong!

Instead you need to sit down with the employee and work out a repayment arrangement.  If the employee agrees to repay the money, a written agreement must be put in place outlining the reason for the overpayment, the amount that was overpaid and how the money owed will be repaid.  If the employee refuses to repay the amount overpaid we suggest seeking legal advice to recover the debt.

Here at HR Gurus we recommend to know before you deduct and make sure you check your registered Award or Agreement to see if deductions can legally be made.  Give us a call on 1300 959 560 and one of our Gurus will be able to help.


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