Payroll deductions
Workforce Management Glossary
Payroll deductions
What are payroll deductions?
A payroll deduction is defined as taking money out of an employee’s pay before it is paid to them. While employers can deduct money from an employee’s paypacket they can only do so under limited scenarios.
With this in mind an employer can only deduct money if the employee agrees in writing and it is mainly for their benefit; if it’s allowed by a law court order or Fair Work Commission order; if it’s allowed under the employee award or it’s allowed under the employee’s registered agreement.
What is the purpose of payroll deductions?
Common examples of payroll deductions revolve around tax and superannuation. However there are other instances where employers may action payroll deductions with their employee’s consent.
For example payroll deductions may occur if there are union fees or health fund fees. This is because deductions are only lawful if they occur in order to benefit the employee in some way shape or form.
How can a business effectively and efficiently manage payroll deductions?
When it comes to payroll deductions there is a lot of paperwork involved. This is because businesses are legally obligated to inform and gain consent from employees in order to deduct their pay.
Once this paperwork is received and signed the payroll department needs to be informed in order to ensure that the employee’s next payslip is an accurate representation of the payroll deduction agreement.