Deductions from Wages & Salary

Requirements as per the Wages Protection Act 1993

From time to time, in your employment relationship, you may extend permission to your employee to use your Trade account to purchase personal items, or tools that then become subject to a tool allowance paid to them as part of their package. For our Agricultural clients, a common arrangement is the processing of a livestock unit for the freezer.

The legislation regarding deductions from wages very specifically requires written consent from the employee. An employer should request the employee to sign a deduction form so this money can be deducted from their ongoing and/or final pay.

Government departments and agencies, such as Ministry of Justice, making deductions against an employee’s wage or salary, are exempt under the Act and no employee consent is necessary.

If the employee has a deduction clause in his employment agreement, this then becomes a requirement to consult the employee instead. Email or text messaging is a great way to instigate the consultation process, as it gives you a written record.

When entering into an arrangement of this nature with your employee, it is important to keep an open line of communication regarding this transaction. An employee is entitled to cease payments or vary the amount – a request which must also be submitted in writing. Normally changes to, or cessation of, payments is processed within two weeks of the employee providing written notification.

It is vital to take into consideration that Section 5 of the Act has some important information regarding such a transaction.

Section 5. Deductions with worker’s consent

    1. An employer may, for a lawful purpose, make deductions from wages payable to a worker-
      a)
      With the written consent of the worker (including consent in a general deductions clause in the worker’s employment agreement); or
      b) On the written request of the worker.
    2.  An employer must not make a specific deduction in accordance with a general deduction clause in a worker’s employment agreement without first consulting the worker.
    3.  A worker may vary of withdraw a consent given or request made by that worker for the making of deductions from that worker’s wages, by giving the employer written notice to that effect; and in that case, that employer shall –
      a)
      Within 2 weeks of receiving that notice, if practicable; and
      b) As soon as is practicable, in every other case, – cease making or vary, as the case requires, the deductions concerned.

If in any doubt, obtaining permission in writing will cover deductions made, and will assist in preserving a harmonious employer / employee relationship.

Our dedicated payroll team are always available for practical advice and  documentation templates.

If you require further assistance, please contact our Payroll team.

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