You, an employer, have multiple ways to deduct from employee wages lawfully. Sometimes, it is a legal requirement enforced by state or federal law, such as income taxes or garnishments. Other times, the deductions serve as contributions to specific benefits the employees can take advantage of in the future.
Still, employees should be aware of these deductions despite being for their benefit. You could avoid issues by making it a practice to have written authorizations before implementing deductions, specifically for the following:
- Insurance premiums
- Benefit plans
- Medical or health coverage
- Loans obtained by the employee from the employer
- Salary advances
- Other voluntary contributions
Some of these deductions might also be optional. In these instances, you should clearly explain the terms and conditions before having them sign the authorization to avoid misunderstandings later.
Determining what deductions are unlawful
Having employees shoulder any expense related to business operations is unlawful since it will ultimately benefit you and your business. These items could include the following, depending on the circumstances:
- Preemployment medical exams
- Gratuities
- Photos and other media requirements
- Uniforms
- Company damages caused by wastage or breakage
- Reimbursable business expenses
You shouldn’t charge employees for these costs because they are inevitable expenses necessary to conduct business. Doing so could be a violation, potentially leading to wage claims and lawsuits.
Ironing out wage-related misunderstandings
You should always be clear and concise when discussing deductions with your employee. This topic is prone to confusion and misunderstandings, possibly causing issues or disputes. Listening to your employees can significantly help, especially when they spot inconsistencies in their paystubs. This information can help immediately detect payroll or recordkeeping errors so you can address them properly.