Question:  Our business is located in a large high-rise building and employees require security cards to access our office. Recently, there has been a spate of lost cards requiring building management to issue new cards.

Building management has advised us that replacement cards will now incur an $80 charge.

We intend to dock an employee’s wages for this cost however our HR department has questioned if this is legal.

Can we deduct this amount from an employee's wages?

Answer: The replacement cost of a security card would have to be borne by the employer. Deducting $80 from an employee’s wages for a lost card would be in breach of the Fair Work Act (s324).

Generally, in the absence of a specific statutory provision or court order, an employer is prohibited from making any deduction from an employee’s wages without the employee’s specific authority.  Even when this authority is obtained, such a deduction can only be made for the purpose of paying a third party, for the benefit of the employee.

Lawful deductions

The Fair Work Act (s326(2)) provides that the regulations may prescribe circumstances in which a deduction or payment is or is not reasonable. Reg. 2.12 of the Fair Work Regulations 2009 provides examples of deductions that may be considered reasonable, including:

  • the deduction is made in respect of the provision of goods or services by an employer, or partly related to an employer, and to an employee, and the goods or services are provided in the ordinary course of the business of the employer or related party, and the goods or services are provided to members of the public on the same terms as those on which the goods or services were provided to the employee, or on terms and conditions that are not more favourable to the members of the general public
  • a deduction of health insurance fees made by an employer that is a health fund
  • a deduction for a loan repayment made by an employer that is a financial institution
  • the deduction is for the purpose of recovering costs directly incurred by the employer as a result of the voluntary private use of particular property of the employer by an employee (whether authorised or not), e.g. the cost of items purchased on a corporate credit card for personal use by the employee, the cost of personal calls on a company mobile phone.

Lawful deductions would also include:

Taxation: it is a legal requirement for an employer to deduct monies from an employee’s wages to comply with federal income tax laws to deduct PAYG instalments from an employee’s remuneration.

Garnishees: this is a court order requiring an employer to withhold part of the wages owed to an employee (the debtor) and instead pay the amount to that employee’s creditor or the court in satisfaction of a debt. A garnishee is designed to ensure the employee makes some payments towards a debt owed. All states and the Commonwealth have laws that relate to garnishee orders, and there are usually limits on how much of an employee’s wage can be garnisheed.

Garnishee orders are also issued from the Family Court under Regulation 20 of the Family Law Regulations. Likewise, the Commissioner of Taxation may issue a notice requiring a third party who owes money to that employer to pay that money instead to the Commissioner under s260-5 of the Taxation Administration Act 1953 [Cth].

Child support: an employer can also be ordered to deduct money from an employee’s wages or salary for child support. Deductions can be made from salary or wages, commissions, bonuses or allowances, certain assessable retirement or termination payments, payments for labour under some contracts and other remuneration such as director’s fees and subcontractor payments.

Commonwealth government payments: The Commonwealth has the power to issue a notice to an employer to garnishee an employee’s wages through section 1233 of the Social Security Act 1991 [Cth]. This may occur where an employee has received excess or wrongly obtained payments from the Commonwealth, such as Centrelink payments or social security payments, and has failed to make a particular payment in accordance with an arrangement to repay the debt.

Salary sacrifice: An employer and an employee can lawfully agree to a salary sacrifice arrangement (SSA) provided that one of the following conditions of s324(a)-(d) of the Fair Work Act is satisfied and the arrangement does not involve a contravention of sections 325 or 326:

  • the deduction is authorised in writing by the employee and is principally for the employee’s benefit
  • the deduction is authorised by the employee in accordance with an enterprise agreement
  • the deduction is authorised by or under a modern award or a Fair Work Commission order, or
  • the deduction is authorised by or under a law of the Commonwealth, a state, a territory, or an order of a court.

The bottom line: Generally, an employer is prohibited from making any deduction from an employee’s wages without the employee’s specific authority. Even when this authority is obtained, such deduction can only be made for the purpose of paying a third party.

Need help?

Use the Authorised Deductions Agreement on My Business Workplace before making a deduction to an employee's pay.