When can an employer deduct from my wages as an employee?

Generally, an employer is NOT allowed to deduct from an employee’s wages unless they are authorised by the employee, the modern award or by a Commonwealth law. The deductions that are allowed are specified under section 324 of the Fair Work Act 2009 (Cth) (‘the Act’).


324 Permitted deductions

(1)  An employer may deduct an amount from an amount payable to an employee in accordance with subsection 323(1) if:

(a) the deduction is authorised in writing by the employee and is principally for the employee’s benefit; or

(b) the deduction is authorised by the employee in accordance with an enterprise agreement; or

(c) the deduction is authorised by or under a modern award or an FWC order; or

(d) the deduction is authorised by or under a law of the Commonwealth, a State or a Territory, or an order of a court.

Pursuant to section 324(1)(a), in order to be principally for the employee’s benefit, it must be considered reasonably appropriate in the circumstances. For example, an employee may wish to include additional payments into their super fund or organise salary sacrifice arrangements. It is illegal under the Act for an employer to make a deduction purely for the benefit to themselves.


Example 1: What happens if I break a computer while at work?

Provided you were operating within the scope of your employment, an employer CANNOT force you to cover the cost of damage to company property by making a deduction you’re your wage. Even if you have an agreement that says you have the right, it may be considered unlawful and may not be enforceable under the Fair Work Act 2009 (Cth) (‘the Act’).

This was upheld in Andreas Bader v Cyclone City Cleaners Pty Ltd [2010] NTMC 044. The Court held that an employer was not allowed to withhold wages for the damage the employee caused to their motor vehicle during the course of their employment.


Example 2: What happens if I am overpaid?

Employers cannot take money out of your pay to fix up their mistaken overpayment. Instead, you should discuss a repayment agreement with your employer. If you agree to repay the money, a written agreement has to be made setting out:

  • the reason for the overpayment;
  • the amount of money overpaid; and
  • the method of repayment.

If a repayment agreement is not made, the only way your employee can recover the overpayment is by making an application to the Court.