Deductions and Overpayment

Money that is taken out of your pay by your employer before you receive it is known as a deduction.

Deductions are only legal if:

  • Both you and your employer agree in writing
  • The Fair Work Commission or a court has ordered the deduction
  • The award that covers your workplace specifically allows for them
  • The enterprise agreement that covers your workplace allows for a deduction and you have authorised it

If you are under 18, one of your parents or your guardian must agree to the deduction in writing – even if the award or agreement allows for them.

All deductions must be clearly noted on your payslip and on your wages record.

What is not allowed

The rules covering deductions are strict. There are many things that your employer cannot do:

  • Your employer cannot benefit from making a deduction – even indirectly
  • If you are purchasing something from your employer, such as accommodation, you must do so voluntarily. For example, your employer cannot make you pay for something and claim that it’s ‘part of the deal with working here’
  • If you purchase something from your employer and pay using a deduction, your employer cannot charge you more than what someone from the general public would pay for it
  • Your employer cannot ask you for an upfront payment at the beginning of your job. For example, you cannot be asked to pay upfront for training or your uniform
  • Your employer cannot charge you for breaking something at work unless you were behaving unreasonably. For example, if you work at a bar and break a glass, your employer must pay to replace it

Legitimate deductions

Your employer may have a legitimate reason for wanting to make a deduction from your pay, including:

  • If you have arranged for your employer to deduct money from your pay before tax to help you pay for certain goods or services – known as salary sacrificing
  • If you want to make extra contributions to your superannuation
  • If you are voluntarily purchasing something from your employer – such as accommodation or health insurance
  • If you have misused your employer’s property – such as using a work car to take a holiday
  • If you don’t give enough notice before quitting and your boss needs to recover wages that you have been paid in advance but have not actually worked for

However, even if your employer has a legitimate reason to make a deduction from your pay, they cannot pressure or force you into agreeing to it.

The award that covers you may allow for a deduction without your agreement. If you are unsure which award covers you, contact your union.

If an enterprise agreement that covers your workplace specifically allows for deductions, you still have to agree – and have the right to say no if you think your boss is being unreasonable.

Overpayment

Overpayment occurs when your employer accidentally pays you too much.

If your employer has overpaid you and expects the money back, you must agree in writing to the repayment. This written agreement must include:

  • The amount overpaid
  • The reason for overpayment
  • A detailed plan about how repayment will work

If you feel that the repayment plan is unfair or unreasonable, you have the right to refuse to agree to it. It is illegal for your employer to just start making deductions from your pay without your consent.

However, if you cannot reach an agreement with your employer regarding a repayment plan, it is possible that your employer may initiate legal action against you. Contact your union if you are unable to agree to a repayment plan – your union’s industrial and legal team will be able to support you.