Legal obligations in docking wages

by Stephanie Zillman11 Jul 2012

The Victorian construction industry watchdog last week sent a stern message to employers: dock wages for illegal industrial activity or else. More broadly, aside from instances of illegal industrial activity, there are very specific obligations on employers for the practice of docking wages.

The Fair Work Act expressly sets out the provisions for deducting monies from an employee’s salary. According to section 324 of Act, an employer may deduct an amount from an amount payable to an employee 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.

Additionally, section 326 of the Act provides that certain terms of modern awards, enterprise agreements, and contracts of employment relating to deductions cannot authorise the docking of wages, including a deduction of payment that is directly or indirectly for the employer’s benefit. Such benefits may relate to instances where an employer has considered an employee to have performed sub-standard work or deducted wages as ‘compensation’ for an accident or incident.

What’s more, in most circumstances employers cannot directly or indirectly require an employee to spend any part of their wages.

Other common examples of unlawful deductions from an employee’s wages by an employer that could breach the Act 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 phone or tablet 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 vehicles)
  • cost of breakages or accidents by employees
  • cost of an employee’s uniform 

HR top takeaway:

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 and, even then, when this authority is obtained, such deduction can only be made for the purpose of paying a third party, for the benefit of the employee.


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