wage deduction

Kelly_9053791

Hi there,

From time to time the business will pay an expense incurred by an employee and then deduct this expense back from the employees wages (as agreed by the employer and employee).

I need to set up a payroll item for these deductions, do I set it up as a "deduction" if so what do I enter as the name of the agency the liability is to be paid to, and will this create a liability payment that must be made? If so, how do I get around this?

Advice appreciated

Linda ABC

Be very careful with this - have a read of https://www.fairwork.gov.au/pay/deducting-pay-and-overpayments before you go ahead and deduct from an employees pay.  If you do go ahead, yes, its a deduction item - and you can call the agency whatever you like or leave it blank...the liability payment doesnt have to be made through Pay Liabilities - but the expenditure the company incurs on the employees behalf should go to the liability account that you use for the Deduction item - so they clear themselves out.

I have previously been advised by HR legal professionals, that even if employees run accounts with their employers business to buy their goods and services, it could be argued that deducting their account payments from their wages is more for the benefit of the employer than the employee and there fore they should be treated like ordinary customers and invoiced for the goods and pay their account to the employer separately, after receiving their full wages.

Kelly_9053791

Thanks for your response Linda - the deductions are only ever for expenses incurred by the employee, ie. fuel to get to work when they have no money, meals when they have no money and are out on the road and an agreement is always in place for it to be paid back, so I assume from reading the Fairwork info - this should be ok?

Appreciate your advice!

Linda ABC

Hey Kelly - makes sense to me and I always thought it was ok but that example you gave is similar to one that I heard at a seminar where the HR guy said could be dangerous if employee tried to challenge down the track... "loaning funds to an employee" was very risky according to this guy - its more of a private arrangement and they should pay you back privately, were his thoughts...  I suppose it depends on the level of documentation you have and your trust in  your staff... good luck!

John Graetz

Good advice Linda.  There is always the chance that some of these transactions that you describe, could be labelled as being fringe benefits and therefore subject to FBT.  I have responded separately to an earlier post to me, by Kelly, on this subject, providing her with some additional tips with the accounting side.  My experiences in this area relate principally to travel costs where sometimes the cost paid on a Corporate Credit Card, has a personal component.
John L G

Kelly_9053791

Thank you both - definitely some interesting food for thought!
I will definitely look into making sure all deduction arrangements are well documented if we proceed this way.

Cheers