Deducting pay

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Taking money out of an employee’s pay before it is paid to them is called a deduction.

There are only limited circumstances where your employer can take money from your pay. If you are under 18 years old, written agreement from your parent or guardian is also required. Any contract that allows your employer to make unreasonable deductions mainly for their benefit has no legal effect. If your employer has taken money from your pay or is withholding your entitlements, we recommend that you contact us here.

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Can my employer take out some of my pay before I get it?

Taking money from your pay is called a ‘deduction’. Your employer can only make a deduction from your pay if:

  1. You agree to the deduction in writing and the deduction is mainly for your benefit, or
  2. The deduction is authorised by you in accordance with an enterprise agreement, or
  3. The deduction is authorised by a modern award, a Fair Work Commission order, or by an order of a court.

If you agree to the deduction, your agreement must specify the amount that will be deducted and any changes in the amount deducted must be permitted, or ‘authorised’ by you in writing. The agreement must be genuine – your employer can’t force you to agree.

You can withdraw your permission at any time in writing.

Can my employer take money out of my pay if a till or register is short, or for something else, like damage to work property?

An employer cannot deduct any amount from your pay or accrued entitlements unless the deduction is authorised by you in writing and is principally for your benefit, or is authorised by an Enterprise Agreement, Award, Fair Work Commission, or court order. Any part of an employment contract that permits such unreasonable deductions has no legal effect.

Example: Short till

A bartender finished their shift, and the till was short $25. The employer cannot deduct this amount from the bartender’s pay, because it would be considered unreasonable in the circumstances and for the employer’s benefit.

Example: Damage to property

A truck driver accidentally reversed into a loading bay and damaged the truck he was driving. His employer tried to force him into signing an agreement to deduct $100 a week from his wage to pay the damage. When the employee refused to sign, he was dismissed from his employment. The Court said the company couldn’t force him to pay them for the damage, and they couldn’t dismiss him for not signing the deduction agreement.

An employer may take disciplinary action against an employee for things like this – for example, in some cases they may warn or dismiss employees for unsatisfactory performance, misconduct or damage to property, but an employer can’t generally deduct an employee’s wages or accrued entitlements without their written agreement.

If you are not sure whether your employer’s requirement to deduct your pay or pay them any amount is reasonable in the circumstances, we recommend that you contact us here.

Can my employer take money out of my pay for courses or training costs?

Some workplaces might ask you to do a training course, or a certificate to help you in your job, e.g., a hair colouring course for a hairdresser, or a forklift licence for a warehouse worker. Employers will usually pay this cost. When you leave this job, your boss might try and take the cost of this training out of your final pay. This is potentially an ‘unreasonable deduction’ and they may not be allowed to do it.

If you are covered by an award or enterprise agreement, it may state whether training should be reimbursed to you, or whether you need to pay it. An employer can also deduct an amount payable to an employee if the deduction is authorised in writing by the employee, it is principally for the employee’s benefit, and it is reasonable. For example, it may be reasonable for an employer to make a deduction for training costs, if the cost of training was high and the employee was fired for serious misconduct.

Do I need to pay back money if my employer has overpaid me?

If you have been overpaid by mistake, for example, due to a payroll error, you will generally need to pay back the overpaid amount to your employer. Any agreement to pay back mistaken overpayments must be in writing. This should clearly spell out:

  • the reason for the overpayment, e.g., a payroll error;
  • the amount of money that has been overpaid; and
  • the way repayments will be made, e.g., bank transfer or a deduction from wages.

If you can’t pay the amount back straight away, you could ask to pay in instalments. It is good to get advice from a financial counsellor to make sure any instalment arrangement is realistic and affordable – find a financial counsellor through the National Debt Helpline.

Example: overpayment due to payroll error

Aung was overpaid $1,450 in the last financial year because of a payroll error. Her award does not specifically allow a deduction to be made when an employee is overpaid.  Aung’s boss told her she would deduct this money from her next pay.

Aung sought legal advice and was advised that she can only have this money deducted if Aung agrees to a repayment arrangement, in writing.

Aung was able to negotiate with her boss to have $90 per week deducted from her pay for the next 16 weeks to pay this amount back. They put this agreement in writing.

This repayment is reasonable because Aung agreed to it in writing, and was given a choice about the amount and method to be deducted each week.

Can my employer make deductions if I’m under 18 years old?

Your award, enterprise agreement or contract may have a clause that permits a deduction or payment to be made.  However, if you are under 18, these clauses have no effect unless the deduction or payment is agreed to in writing by your parent or guardian.

Can my employer deduct from my final pay if I have not given notice?

An employer cannot deduct wages owing to a casual employee for not giving sufficient notice of their resignation. This is because a casual employee generally does not have to give notice of resignation.

If a permanent employee has not given enough notice of resignation, an employer may be permitted to withhold a portion of wages owing. It is important to check whether your Award or Enterprise Agreement entitles your employer to do this.

Some awards say that an employer can deduct wages if:

  1. the employee is over 18 years old;
  2. the employee has not given the notice as per the period stated in their award; and
  3. the deduction isn’t unreasonable.

In these circumstances, generally the employer can only deduct an amount that is no more than one week’s wages.

Employers can only make deductions from wages owed under the award. They cannot deduct from other entitlements owed to you, such as annual leave or other payments under the award. To check if you are covered by a modern award, you can visit the Fair Work Ombudsman page here.

For more information, see our pages on Ending employment and Final pay.

What can I do if my employer withholds or deducts my pay?

There are limited circumstances where an employer can deduct your pay, even if your employment contract says otherwise. We recommend that you contact us for free and confidential advice to check if the deduction or payment is permitted.  

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