What types of wage deductions are typically made?
Examples of legally required wage deductions include wage garnishments, Social Security taxes, and income taxes.
Examples of wage deductions made for the employer's convenience are those made to cover wage advances, the cost of board and lodging, merchandise purchased by the employee, and docking for tardiness.
Examples of wage deductions made as a favor for the employee are those for union dues (See ¶36,880
), charitable contributions (See ¶36,870
), tools, or uniforms that the employer is not obligated to supply and United States savings bond purchases.
May deductions be made for participating in an employer benefit plan? If authorized in writing by the employee, deductions from wages may be made for the cost of the employee's participation in an employer plan. For example, deductions may be made for health care coverage, life insurance, dental care, eye care, a savings plan, or a retirement plan. Deductions may not reduce the employee's earnings below the applicable minimum wage rate, however.
Are deductions permitted for certain medical examinations? All the states that address this issue do not permit employers to deduct the cost of medical examinations and records that are required as a condition of employment-either by your organization or by law-from employee wages.
Are deductions for shortages and losses permitted? Unless your organization can show that an employee's willful neglect or willful act caused the shortage or loss, your organization may not make a deduction from an employee's wages for such things as cash register shortages, breakage, spoilage, customer theft, customer bad checks, or faulty work. If your organization has a procedure for accepting checks, for example, and, knowing the procedure, the employee does not follow the procedure, willful neglect will be a consideration if the check is returned unpaid by the bank.
For state-specific information, see State Laws.
What kind of deductions are allowed for board, lodging or other facilities?
Employer-provided housing, meals, meal allowances, van pools, merchandise from organization stores, fuel and utilities furnished for noncommercial use are some of the items that may be included in wages as board, lodging and other facilities. The test is whether the item is customarily provided to employees in your organization's business and if it is provided at a reasonable cost (without profit to your organization) and for the benefit of the employee.
Many restaurants permit employees to eat at least one meal of restaurant food during a work shift. Apartment complexes may provide an apartment rent-free for the manager of the complex or for the maintenance person. Some schools of higher education reduce the tuition of students who work for the school. Athletic clubs may provide membership; dry cleaners may provide a cleaning allowance.
What constitutes other facilities? Other facilities are items like board or lodging-meals furnished at organization restaurants or cafeterias, housing, general merchandise provided by a organization store or commissary, fuel (coal or firewood, for example), utilities (electricity, water, and gas) furnished for employees' noncommercial use, transportation to and from work when travel time is not work time and the transportation is for convenience not out of necessity, reduced tuition for student employees of the educational institution, and some meal allowances. The facility must be for the benefit of the employee, not for the convenience or benefit of the employer, otherwise it is a business expense and not a facility.
How is reasonable cost determined?Reasonable cost
is the actual cost of providing the item, plus the cost of operation and maintenance, and including an amount for depreciation plus interest on the depreciation (up to 5 1/2 %). No profit may be figured into the reasonable cost, however. If board, lodging, or other facilities are furnished to employees at a profit, deductions from wages are illegal to the extent that the profit reduces the wage (including the reasonable cost of the item) below the required minimum.
Can an employer make any profit on goods or services for which deductions are made? Only those employees to whom the goods or services are provided for at no profit to the employer are included in the category of employees from whose wages deductions for the goods or services may be made. If the goods or services are provided at no profit to the employer, the deduction is allowed even if the result is that the employee's cash wages do not equal minimum wage.
Are verbal authorizations for deductions acceptable?
Authorizations for deduction should be in writing. A form that the employee reads and then signs may be the best way to ensure that employees understand the conditions under which deductions are made, the responsibility they have regarding the deductions, the amount that will be deducted, how an authorization may be withdrawn, the voluntary nature of the deduction and other matters concerning the deduction. Even if the deduction is provided for by a collective bargaining agreement, it is a good practice to get the individual employee's signature on a deduction authorization.
For state-specific information, see State Laws.
Are employers required to provide a statement of deductions?
Although not required by the Fair Labor Standards Act, many states now require that employers supply a statement of deductions with each paycheck for which deductions are made. The information that must be included on the statement varies from state to state, but most require that the employee's name, the employer's name and address, the gross and net wages and the reason for and amount of the deduction appear on the statement. The statement may be attached to a paycheck or on a separate page. For state-specific information, see State Laws.
<p>Examples of legally required wage deductions include wage garnishments, Social Security taxes, and income taxes.</p>
What types of wage deductions are typically made?
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