New rules apply for employee authorised deductions. As an employer, be clear on what you can and cannot do.
Deductions that are lawful
Taking money from an employee's pay before they get it is called a deduction.
The general rule is that you can do so if/when:
the employee agrees in writing and it’s mainly for their benefit.
it is allowed by the law, or a court.
it is allowed under a particular award, or enterprise agreement, and the employee agrees to it.
Think about the deduction you are already making for Superannuation, or salary sacrifice, even taxes. These are 'authorised deductions'.
For any other types of deductions, you must have the employee's written agreement, and it should benefit the employee (which usually isn't the case).
Remember that it is unlawful to put pressure, or coerce an employee into agreeing to a deduction.
You'll need to make sure that any money taken out of your employee's pay is clearly shown on their pay slip.
The employee has the right to cancel or revoke their permission for the deduction whenever they choose.
Deductions that are not lawful
Typically, your ability to deduct from an employee's wages needs clear written agreement from the employee.
Remember that deductions purely benefiting you (as the employer) or a related party are generally not allowed, even with written consent.
Some employers ask for a 'permissible deduction clause' in their employment contracts, or it may be mentioned in a particular award, or an enterprise agreement. However this does not automatically mean it is lawful to do so. For example, an employee has to agree to any deduction under a registered agreement. Even if it’s allowed by an award or agreement, the deduction still needs to be fair and reasonable.
I suggest that you obtain legal advice or get in touch with me, if you need clarity on a pay deduction before you proceed.
Damage to company property
Again, each case is different, but generally speaking, an employer is not allowed to recover repairs, or damages to company property from an employee's wage. Unfair, I know..
There are exceptions, but you'll need to consider all factors carefully before doing so.
For this reason, I always suggest to my clients to consider a company property policy as a preventative measure. This helps in setting clear guidelines and procedures regarding the use of company property.
Wages overpayment
Overpayments happens. Same rules apply here too, it is unlawful to automatically deduct the overpayment amount from the next paycheck without the employee's written approval.
When you discover an overpayment, inform the employee as soon as you can.
Discuss how to handle the repayment: both parties can agree on a reasonable repayment plan, then document this in writing.
This plan should have:
the reason for the overpayment,
the repayment amount,
method (ie electronic transfer, etc),
the timeline.
If the employee doesn't agree to a repayment plan, get legal advice as you might need to go through legal procedures to recover the overpaid amount.
You can read more on this topic directly on the Fair Work Website.
Make sure your business complies with Fair Work laws!
If you have concerns about this topic, or need help with compliance, send me an email at sandra@hrconsultingtas.com.au.
Let's make sure your business avoids costly legal issues and supports your staff effectively.
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