Can my employer make deductions from my wages without permission?

Employees are entitled to be paid out all accrued annual leave and annual leave loading entitlements upon termination of their employment, whether the employment is terminated by resignation or otherwise. Under section 90(2) of the Fair Work Act 2009, when an employee’s employment ends, annual leave of the amount payable had the employee taken the annual leave must be paid out. Most modern awards provide for employees to be paid their end of employment entitlements within 7 days of employment ending. This requirement may also be found in many employment contracts, enterprise agreements or other registered agreements.

In a recent employment dispute, IR Advocates assisted a former employee of a construction company. The employee had been underpaid his end-of-employment entitlements upon resigning from employment, and had various unauthorised deductions made from his pay. The employee was a leading hand construction worker who had been employed for about 3 years. 

The employment relationship was covered by the Building and Construction General On-Site Award. In October 2019, he gave notice of his resignation. Following resignation, the employee had concerns that he had been underpaid after comparing his payslips with pay amounts received from the employer. The period of underpayment extended over a period of 2 years. The employee also had various deductions made to his wages, although these deductions had not been authorised by the employee. 

What deductions can and cannot be taken from an employee’s pay? 

During the course of his employment, the employee had been involved in a minor motor vehicle accident whilst driving the Employer’s motor vehicle. The employer deducted the cost of the insurance excess from the employee’s wages to cover the cost of repairs to the motor vehicle. This was despite the fact that the employee was not at fault for the accident and that the accident occurred when the employee was performing his ordinary duties. 

Under the Award, the employee was entitled to a meal allowance while working away from home. During his employment, the employee was required to work in a remote town for a week. He was told to pay for these meals on the company credit card as opposed to being paid living away from home and meal allowances when he was away from home. However, purchases made on the company credit card were subsequently deducted from his wages. The employer noted that these were “personal expenses”. The employer also told him to buy work equipment on the company credit card. These expenses were also deducted from his wages.  

During his employment, the employee held a valid visa allowing him to work in Australia and had deductions taken from his wages for ‘visa contribution fees’. The employer had sponsored him to work but the sponsorship application was rejected by the Department of Home Affairs. The employer appealed this decision and charged the cost of the appeal to the employee by deducting the cost of the visa sponsorship review application from his pay. These deductions were not authorised by the employee. 

Between November 2019 and January 2020, the employer dismissed several of the employee’s attempts to get in contact and resolve the issue. In January 2020, the employee engaged with us to advocate on his behalf. 

Section 323(1) of the Fair Work Act 2009 states that an employer must pay its employees amounts payable for the performance of work, in full and in money, except when making a deduction under s 324(1). 

Section 324(1) of the Fair Work Act 2009 permits an employer to make certain deductions if:

  1. the deduction is authorised in writing by the employee and is principally for the employee’s benefit;
  2. the deduction is authorised by the employee in accordance with an enterprise agreement;
  3. the deduction is authorised by or under a modern award or an order of the Fair Work Commission (to our internal FWC page); or
  4. the deduction is authorised by or under a law of the Commonwealth, a State or a Territory, or an order of a court. 

Deductions made by an employer on an employee’s wages must be reasonable (see reasonable deductions by an employer for more information). An example of a reasonable deduction is one made for goods and services provided by the employer to an employee in the ordinary course of an employer’s business. For instance, if the employer is a health fund and the employee takes out a policy in that health fund, a deduction for health insurance fees would be reasonable. 

Other deductions to reimburse the employer for costs as a result of an employee’s voluntary private use of the employer’s property are also reasonable, regardless of whether that use was authorised or not. These include deductions for personal purchases made on a company credit card, personal calls made on a company mobile phone or for the cost of petrol for the private use of a company vehicle. 

If an employer makes unlawful deductions from an employee’s salary in contravention of the Fair Work Act they run the risk of being exposed to underpayment claims and civil penalties.  

What entitlements should be paid out when an employee ends their employment? 

An employer must pay out all entitlements when the employee’s employment ends (see Final Pay for more information). The employee worked from June 2017 to November 2019. Over the course of his employment, the employee accrued a significant amount of annual leave. He used a portion of it over his employment. When he took annual leave, the employer failed to pay annual leave loading on his leave pay. Upon his resignation, the employer failed to pay the outstanding balance of his annual leave and any applicable loading.

During his employment, the employee was required to maintain a mobile phone account for work purposes  He was only reimbursed for about half the amount each month, despite maintaining the work mobile phone and using it solely for work purposes. 

How can IR Advocates help employees get paid their employment entitlements?

Employers are obliged to make employment records available for inspection and copy under reg. 3.42 of the Fair Work Regulations 2009. We made numerous requests to the employer and the employer’s solicitors to produce the employee’s employment records. As the employer ignored these requests, we assisted the employee commence proceedings against the employer in the Local Court of NSW for underpayment and failure to comply with an employment records request. 

With our help, our client successfully sought compensation for his annual leave and annual leave loading entitlements which had not yet been paid, and the reimbursement of unlawful deductions by the employer.  

We achieved the outcome the client was entitled to through a high level of persistence to the employer’s legal representatives. A factor that further strengthened our case was the fact that the conduct was not an isolated incident. In fact, two other employees also had their entitlements withheld. We worked with each of the former employees to commence concurrent proceedings against the employer. This gave each individual involved grants to pursue the employer for a serious contravention of civil remedy provisions under the Fair Work Act 2009.

The employer settled the matter for an amount close to what our client was entitled to, despite having to commence proceedings against the employer. 

If you need assistance or have any questions about your employment entitlements, contact us today. Stephen Arulogun and his team are well experienced in providing advice and solutions