Feeling generous and wanting to help an employee out financially?  It is not unusual for employers to lend money to employees to help them through a sticky situation. However, it may get you into hot water if you don’t structure it properly.

As we now live in an era where Government, the unions and the media regularly talk about employees suffering ‘wage theft’, amendments have been made to the Fair Work Act (2009) placing greater legal limitations on employers making deductions from an employee’s wages.

This has obviously been triggered by the acts of a very small number of unscrupulous employers who gain media attention while Governments cannot be seen not to respond.

Firstly, the Fair Work Act states that any deductions may only be made for the benefit of the employee.

Secondly, before commencing any deductions it is appropriate to set up a signed Agreement outlining all the details of that deduction including the purpose, the amount(s), the duration of deductions, payment frequency and that it was requested by the employee if this is not clear in the purpose of the payment. If there is any other relevant documentation keep a copy on file.

Most deductions are fairly straight forward such as union fees, additional superannuation or health fund payments. However, it gets more complex when it relates to repayments of loans the employer extended to the employee, lump sum education or training expenses or the repayment of overpaid wages by instalments which has been agreed to by the employee.

So, before you make that seemingly generous decision to loan an employee money, it is essential to put in place an Agreement and have them sign it before commencing.

Employees can generally claim back an underpayment of 7 years. Not putting in place the appropriate paperwork leaves an employer open to a future disgruntled employee stating they never agreed to the arrangement.

Simple blanket rule – put in place a signed agreement with all the details before you make any non-statutory deductions.

If you are currently making deductions from an employee’s wages it is strongly recommended you review this and put in place a signed agreement.  

Please contact Hunter Employee Relations for assistance if you have any questions about the legitimacy of a deduction or how to develop an agreement for this purpose.

Give me a call anytime to talk it through.

Kind Regards

Michael Schmidt

M 0438 129 728

[email protected]

www.hunteremployeerelations.com.au

Industrial Relations - Employment Law - Workplace Performance