Deductions from employee entitlements

Under the Fair Work Act, employers are not permitted to deduct money from an employees’ statutory, award, enterprise agreement or contractual entitlements except in the very limited circumstances which are found in sec 324 of the Act namely if the deduction is authorised

  • in writing by the employee and is principally for the employee’s benefit (for example, insurance premiums or salary sacrifice payments); or
  • by the employee in accordance with an enterprise agreement (for example, union membership fees); or
  • by or under a modern award or an order of the FWC; or
  • law or an order of a court (for example, deductions such as income tax and superannuation contributions).

Furthermore any such deductions must not be directly or indirectly for the benefit of the employer or “unreasonable in the circumstances”. On the face of it the prohibition would extend to deductions authorised by the employee’s contract of employment even if the employee’s employment is not covered by a modern award or enterprise agreement, although there must be some argument about the constitutional legitimacy of the provision going this far.