As an employer, situations may arise in which an employee ends up owing the organisation money. But when can an employer dock money from a worker's salary?
We asked Gloria James-Civetta, managing partner, Gloria James-Civetta & Co, about the circumstances in which an employer is legally able to make pay deductions from its employees.
The legality of making deductions from an employee’s salary depends on whether they fall under the Employment Act, James-Civetta told
HRD.
For those employees that do fall under the Act, sections 26-32 make clear that no deductions should be made to an employee’s salary unless the circumstance falls under one of the Act’s permitted reasons, has been ordered by a court, or is pursuant to other declarations by authorities.
“Under the Employment Act, employers can only make deductions from an employee’s salary for reasons authorised [under the act],” James-Civetta said.
The authorised circumstances in which deductions can be made include:
- Absences from work
- Damage to or loss of good expressly trusted to an employee, where damage or loss is directly attributable to neglect or default
- House accommodation supplied by the employers
- Recovery of advances or loans
- Over-payment of salary
However, there is one significant restriction on these deductions: “You must note that an employer cannot deduct more than 50% of the total salary payable in one salary period,” James-Civetta said.
This rule, however, does not apply to every situation.
“This is not applicable to deductions as a result of absence from work, recovery of advances or loans or approved deductions in relation to payments to any cooperative society,” she added.
The Ministry of Manpower (MOM) website also states that the 50% restriction does not apply to final salary payments made after a contract of service has been terminated – meaning employers may recover the full sum of money owed to them in this instance.
For those employees not covered by the Employment Act, the basis for whether deductions are permitted will be governed by their respective employment contract – meaning employers should consider including appropriate clauses at the time of drafting.
The MOM website advises that whilst employers are permitted to make deductions under the Employment Act and in certain circumstances, “Any compensation should generally be recovered directly from [the employee], rather than through a salary deduction.”
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