All Australian employees are protected by employment laws when it comes to authorised deductions from wages. The national employment laws set out the minimum requirements for most workplaces in Australia. The majority of workers are covered by the Fair Work System, unless they work for a state or local government (other than in the ACT or the NT).
Under the Fair Work Act 2009, payments to an employee for work must be paid in full and at least monthly. Authorised deductions from wages can only be made in limited circumstances. An employee’s express written authorisation of the amount is needed, unless the deduction is authorised by:
- an industrial instrument, or
- the law, or
- a court order.
Employers also cannot require their employees to spend their wages on specific things (such as clothing for work), unless it is reasonable. If deductions are made unlawfully, an employer can be liable to civil penalties of up to $10,200.00 for an individual and $51,000.00 for a corporation.
Under the Act deductions may be made from an employee’s wages or salary only if:
- the deduction is authorised in writing by the employee and is principally for the employee’s benefit (such as a salary sacrifice arrangement, Health Fund fees or loan repayments). The authorisation must set out the amount to be deducted and may be withdrawn or varied at any time.
- the deduction has been authorised in accordance with an enterprise agreement by the employee.
- the deduction is authorised under an order of the Fair Work Commission or by a modern award.
- the deduction is authorised by or under a law of the Commonwealth, a State, or a territory, or an order of a court (e.g. income tax, child support or a garnishee court order).
An award, enterprise agreement or contractual term that allows a deduction from wages or salary is of no effect unless the deduction is for the employee’s benefit and is reasonable. Reasonable deductions can relate to things such as the provision of goods and services by the employer and the voluntary private use by an employee of the employer’s property. Examples of this would be an employee’s private use of a company credit card or mobile phone, or petrol for an employer provided car used privately.
An example of a common modern award provision might be that, if on termination, an employee fails to give the required notice the employer may withhold from any termination monies the amount in lieu of notice. Deductions can also be made to retrieve an over-payment of wages or salary but only if it is allowed under a registered agreement or award.
Under a court order, an employer can be ordered to withhold part of an employee’s wages or salary and pay the monies to another party. The court order renders the withholding an authorised deduction from wages. If an employer does not comply with the order they may be penalised. Examples are:
- a garnishee order requires part of the wages of a particular employee (the debtor) to be paid instead to the employee’s creditor or the court in satisfaction of a debt. A fee can be retained for making the deductions. There are various types of garnishee orders as a number of different courts can issue them. All States and the Commonwealth have laws about garnishee orders, and there are limits on how much can be deducted.
- a child support or order for maintenance requires monies to be deducted and paid to the Department of Human Services. The employer cannot charge a fee for making the deductions. An employee can’t be left with a net pay (after tax instalment and child support deductions) of less than the Protected Earnings Amount (‘PEA’), unless the deduction is under a Notice Pursuant to Section 72A.
Employers can’t take money out of an employee’s pay to correct a mistake made by the employer or to fix up an over-payment of wages or salary unless they are authorised by an industrial instrument, or the employee is agreeable to repaying the money. If the employee agrees to the money being deducted from their wages, they must enter into a written agreement with the employer. The agreement must set out:
- the reason for the over-payment,
- the amount that was overpaid, and
- the way the repayments will be made.
If the employee does not enter into an agreement for authorised deductions from wages, the employer can take civil action to recover the monies owed.