The Fair Work Act 2009 (Cth) (“FWA”) provides that amounts payable to employees in relation to the performance of work must be paid in full and at least monthly. (1) These amounts for a relevant pay period include incentive-based payments and bonuses, loading, monetary allowances, overtime or penalty rates and leave payments.
Issues can arise where an employer deducts monies from an employees wage or salary. The FWA provides specific provisions regarding these circumstances and it is important that employers understand their obligations.
When can an employer make a deduction from an employee’s wage or salary?
Generally, an employer is prohibited from making any deduction from an employee’s wage or salary. However, the FWA identifies circumstances in which an employer may deduct from an employee’s wage or salary.
Section 324 of the FWA provides that deductions by the employer may be made from an employee’s wage or salary if:
- the deduction is authorised in writing by the employee and is principally for the employee’s benefit; or
- the deduction is authorised by the employee in accordance with an enterprise agreement; or
- the deduction is authorised by or under a modern award or a Fair Work Australia order; or
- the deduction is authorised by or under a law of the Commonwealth, a state or a territory, or an order of a court. (2)
The FWA states that certain terms of a modern award, an enterprise agreement or a contract of employment have no effect on the deduction of an amount payable to an employee in relation to the performance of work.(3) This includes whether a deduction of payment is directly or indirectly for the employers benefit.(4)
Common examples of deductions from an employees wage or salary by an employer that could breach the FWA include:
- deductions to cover shortages from cash tills or cash floats
- cost of training courses provided to an employee where the employee is directed to attend by the employer
- cost of a mobile telephone provided to the employee for work-related use
- cost of tools and equipment supplied to an employee
- cost of damages to the employer’s assets (including motor vehicles)
- cost of breakages or accidents by employees
- cost of an employee’s uniform(5)
Circumstances in which a deduction considered is reasonable or not
Section 363(2) of the FWA provides that the Regulations may prescribe circumstances in which a deduction is or is not reasonable.(6)
Regulation 2.12 of the Fair Work Regulations 2009 provides circumstances where deductions may be considered reasonable. These include where:
- 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 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; or
- 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).(7)
Examples of these circumstances include, but are not limited to:
- 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
- a deduction due to:
- 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
- the cost of petrol purchased for the private use of a company vehicle by the employee.(8)
Application of the FWA in the Federal Court
The recent case of Australian Education Union v State of Victoria (Department of Education and Early Childhood Development)  FCA 1196 is considered one of the most significant “unlawful deductions” case made under the FWA, where over $20 million was deducted over a period of time from teachers and principals salaries as contributions to a laptop scheme.(9)
‘Between 1 July 2009 and 29 November 2013, fortnightly deductions of between $4 and $17 were made by the State of Victoria (Department of Education and Early Childhood Development)’ (“SOV”) from the salaries of teachers and principals who were involved in a scheme known as the “eduSTAR.NTP Program” (previously known as the Notebooks for Teachers and Principals Program).(10) This scheme provided teachers and principals with a ‘laptop computer for use as a work tool’.(11) Although subject to some restrictions, the teachers were allowed to use the laptop computer for personal use.
The Australian Education Union challenged the lawfulness of the deductions from the salaries of teachers and principals in relation to the laptop computers.
Justice Bromberg found that the eduSTAR.NTP Program deductions were not permitted by section 324(1) of the FWA. The deductions were held to be “unreasonable in the circumstances”, and were not principally made for the benefit of the teachers.
Further, the failure of SOV to have paid the teachers in full was a contravention of section 323(1) of the FWA.
Any deductions from employee wages should be carefully considered to ensure they are permitted deductions allowed under the FWA. Pointon Partners has significant experience in the area of employee deductions.
If you have any queries or require any assistance in this area please contact Michael Bishop of our office on 03 9614 7707.
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(1)Fair Work Act 2009 (Cth) s 323 (1)(a), (c).
(2)Ibid s 324(1).
(3)Ibid s 326(1).
(6)Fair Work Act 2009 (Cth) s 326(2).
(7)Fair Work Regulations 2009 Reg 2.12
(9)Australian Education Union v State of Victoria (Department of Education and Early Childhood Development)  FCA 1196 Summary, Bromberg J, 6 November 2015 at .
(10)Australian Education Union v State of Victoria (Department of Education and Early Childhood Development)  FCA 1196 Summary, Bromberg J, 6 November 2015 at .