In the WA state industrial relations system there are restrictions on what deductions an employer can make from an employees pay, and it is prohibited for an employer to compel employee to spend or pay an amount (such as a cash back arrangement) or requiring an employee to accept goods, accommodation or services as payment.
These requirements come from the state Minimum Conditions of Employment Act 1993.
Deductions from pay
An employer may only make a deduction from an employee’s pay if:
- the employer is required by a court or a state or federal law to make the deduction (e.g. tax that must be withheld from the employee’s pay);
- the employee has authorised the deduction in writing (as part of a written employment contract or otherwise) and the deduction is paid on behalf of the employee; or
- the employer is authorised by the WA award to make the deduction and the deduction is paid on behalf of the employee.
A term of a WA award or employment contract providing for a deduction from an employee’s pay will be of no effect if it is for the benefit of the employer or a party related to the employer and is unreasonable in the circumstances. For example, a provision in an employment contract that enables an employer to deduct a grossly inflated amount of rent (beyond market value) from an employee’s pay for employer-provided accommodation could constitute an unreasonable deduction.
Deductions or requirements to pay an amount of money to the employer or another person in relation to an employee under the age of 18 are not permitted unless the deduction or payment is agree to in writing by the employee’s parent or guardian.
Deductions from an employee’s pay can be made if an employee gives written authority for such deductions to be made and monies paid to another party on their behalf. Some common examples include social or sports club membership, private health fund premiums, and voluntary employee superannuation contributions. An employee can withdraw their authorisation at any time by giving written notice. An employer is not obliged to make deductions requested by an employee.
An employee who believes that they have been underpaid due to an unlawful deduction from their pay can visit Steps to make a complaint about unpaid wages or entitlements for information on the steps to take.
Prohibition on accepting goods, accommodation or services as payment
A state system employer is prohibited from directly or indirectly compelling an employee to accept goods, accommodation or other services of any kind instead of money as any part of the employee’s pay.
Prohibition on compelling employees to spend or pay an amount (such as a cash back arrangement)
An employer is prohibited from directly or indirectly requiring an employee to spend, or pay to the employer or another person, an amount of the employee’s money or the whole or any part of an amount payable to an employee in relation to the performance of work if:
- The requirement is unreasonable in the circumstances; and
- In the case of a payment, the payment is directly or indirectly for the benefit of the employer or a party related to the employer.
A prospective employer is not able to directly or indirectly require a prospective employee to spend, or pay to the employer or another person, an amount of the prospective employee’s money if:
- The requirement to pay money is in connection with employment or potential employment of the prospective employee by the prospective employer;
- The requirement is unreasonable in the circumstances; and
- In the case of a payment, the payment is directly or indirectly for the benefit of the prospective employer or a party related to the prospective employer.
To illustrate, it is unlawful for:
- A prospective employer to require a prospective employee to pay them money in order to obtain employment;
- An employer to ask an employee to pay back some of their wages to the employer in order to keep their job; and
- An employer to require an employee to spend part of their pay on goods the employer sells to the public.
Asking an employee for any amount to be spent, or money to be paid, in a particular way that involves undue influence, duress or coercion, is also prohibited.
These provisions do not prevent legitimate, mutual agreements being reached between an employer and an employee for overpayments to be paid back by an employee to the employer.
Enforcement of these provisions
Enforcement action can be taken in the Industrial Magistrates Court against an employer who contravenes these provisions.
The Court can impose a penalty of up to $13,000 (or $130,000 in the case of a serious contravention) for individuals or a penalty of up to $65,000 (or $650,000 in the case of a serious contravention) for bodies corporate.
