Deductions from employee’s wages, is it legal ?

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Deductions from employee’s wages, is it legal ?

July 18, 2016

There may be times where an employer wants to make deductions from an employee’s wages. Reasons for this could include equipment that has not been returned, an employee that has not turned up for work and those hours had already been included in his pay, or an employee that does not give the required notice period.


So can deductions be made lawfully?

The Wages Protection Act, 1983 states that “an employer may, for lawful purpose, made 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”.


It is a good idea to have a general deductions clause in the employment agreement and possibly a provision stating that if the employee does not give the required notice period then the employer can deduct the un-worked portion from the employee’s final pay. In saying that the WPA states that an employer “must not make a specific deduction in accordance with a general deductions clause in a worker’s employment agreement without first consulting the worker’. So, before any deductions are made, you will need to explain the deduction that you are making to the employee. You also need to seek the employee’s feedback and give it consideration before making a decision. If an employee may say that do not want any deduction to be made in which case seeking guidance from the Employment NZ or a professional HR or legal service would be advisable before making any decisions.


The WPA also has a provision stating that an employer cannot make an “unreasonable” deduction, unfortunately there is no clarification on what “unreasonable” is so if you are unsure then I suggest seeking professional advise before proceeding.


There are certain deductions you could be instructed to make from an employee’s wage such as court fines, child support costs or Income tax payments and you legally need to do so.


FlexiTime software is set up to handle any pay deductions with ease. Contact us now for more information.

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