Making Deductions from Pay

April 13, 2006

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What seems simple on the surface — deducting money from an employee's paycheck — can be extremely complicated. Several federal laws apply and, potentially, many state laws may apply as well. The laws are not straightforward and they often appear to be in opposition.

Deductions can be broken into three types:

deductions required by law — examples are wage garnishments, Social Security taxes, and income taxes
deductions for the employer's convenience — examples are those made to cover overpayments, wage advances, docking (for things such as spillage, breakage, or cash register shortages) or deducting for tardiness
deductions that are done as a favor for employees — examples are benefit premiums, charitable contributions, and uniforms