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New Rules on Employee Authorised Deductions from Pay

Starting December 30, 2023, there are new regulations governing employee authorised deductions from pay. These deductions can be either one-off or recurring and can be for specific amounts or varying amounts over time. Referred to as employee authorised deductions, they require written permission from the employee. Examples of such deductions include payments to a health fund or union fees.




Employers are permitted to make these deductions only if they primarily benefit the employee. Some examples include deductions for goods or services provided by the employer, such as spa treatments in a spa business operated by the employer, or when an employee utilises a company credit card for personal purchases.


Record-keeping is essential for these deductions, and they must be documented in the employee's records. Pay slips must detail the amount of each deduction and the name or name and number of the fund or account into which the deduction was deposited.


Additionally, awards and registered agreements may also allow for deductions from pay under certain circumstances.


However, deductions directly from an employee's pay are subject to strict conditions. Employers must obtain written consent from employees, ensuring that the deduction primarily benefits the employee, or else they may face penalties or have to back-pay the employee.


Examples of permitted deductions include salary sacrifice arrangements and voluntary contributions to an employee's super fund.


In cases of overpayments due to employer error, deductions from an employee's pay are permissible only under limited circumstances. Employers must discuss and agree upon a repayment plan with the employee, documenting the reason for the overpayment, the amount, and the terms of repayment.


Moreover, certain deductions may be allowed when an employee fails to provide adequate notice of termination as per their award. However, such deductions are limited and cannot be taken from other entitlements such as accumulated leave.


It's important to note that even if deductions are outlined in awards, agreements, or employment contracts, they may not be permissible if they primarily benefit the employer or if the employee is under 18 years of age.


Compliance with legal requirements and ensuring that deductions genuinely benefit employees and are mutual agreed in writing are crucial aspects of implementing authorised deductions from pay.


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