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Payroll & Taxes

Which Paycheck Deductions are Permissible?

Christine Batten, PHR
by Christine Batten, PHR on May 16, 2017

iStock-636255046.jpgTo deduct or not to deduct? It’s a common question for employers and a complex issue you want to get right. For both exempt and non-exempt employees, permissible paycheck deductions typically include those required by law (taxes) or by court order (garnishments) and those at the request and for the benefit of the employee (benefits premiums, 401(k) deposits). Aside from those situations, you generally may not deduct from an exempt employee’s pay – with a few exceptions:

  • It’s the first or last week of employment and the employee does not work the entire week
  • An employee is absent from work for reasons attributable to FMLA
  • An employee calls in sick but has already used all of his or her paid sick days or has not yet become eligible for sick time (If the employer doesn’t have a paid sick leave plan, time may not be deducted if the employee has worked any day that week.)
  • An employee takes a full day off for personal reasons
  • An employee is suspended for a major safety violation
  • An employee is suspended for the violation of a written company policy which applies to all employees and which relates to workplace conduct (workplace violence, sexual harassment, drugs/alcohol on company property, etc.)

The only instance in which an exempt employee can ever have pay docked in partial day increments is if he or she misses part of a day for a reason attributable to FMLA. In that case, you only have to pay the employee for the part of the day he or she actually worked. In all other circumstances, if an employee works any part of the day, you must pay him or her for the whole day.

Combining Wages

Employers can require employees use vacation, sick, or personal time to cover partial day absences. For example, if an employee has a doctor’s appointment and is three hours late, or if someone asks to leave an hour early to renew their driver’s license, you can pay them for the hours worked and have them use paid time off to make up the difference. As long as the employee receives his or her full salary, it’s legal to combine wages with personal or sick time.

Non-Exempt Employees

With the exception of the permissible deductions previously referenced (taxes, garnishments, benefits), under the FLSA, deductions from a non-exempt employee’s pay generally cannot take their wages below minimum wage – not even if they sign a document authorizing it. Employees may not sign away their rights under the law. As such, if an employee only makes minimum wage, you may not take any deductions. Exceptions to this are for advances in pay and/or loans paid to employees.

Employee Deductions

Because it’s considered an employer convenience to deduct for items like uniforms, tools, or property damage, the employee must authorize all such deductions in writing ahead of time. In fact, all instances that necessitate deductions from pay should be in writing including policies, procedures, acknowledgements of receipt of property, agreement to repay, authorization for deductions, etc. Many states have restrictions on the types of deductions employers can take from employees’ pay as well as the terms under the deductions can be made so be sure to check the rules in your state for specifics.

Wage Garnishments

A wage garnishment is a court order that requires an employer to withhold a portion of an employee’s wages to pay part of that employee’s outstanding debt. Federal and state regulations determine how much an employer should withhold from an employee for a court ordered garnishment or tax levy each pay period. Wage garnishments are not voluntary. In most states, withholding must begin within the pay period specified by the writ’s date of service. Employers must continue withholding until they receive an order to stop. Otherwise, there are stiff penalties to pay.

Wage and hour laws can be tough to navigate, but FrankCrum can help. Our HR experts can provide you with the guidance you need to stay on top of these compliance issues.

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Christine Batten, PHR
Christine Batten, PHR

Christine has over 20 years of HR related experience with a background in labor and employment law.