[Approx 1 min read]
Some SMEs struggle to move away from a ‘handshake’ method of deducting from their team members pays – and this could be a problem in 2024.
(note: this information applies to national system employers only)
What was the deal?
Under the Fair Work Act 2009, rules already apply when making deductions from an employee’s pay.
For deductions made for the employee’s benefit (like a salary sacrifice to a health fund or voluntary super contributions), an employer is required:
- To have a written agreement; and
- Specify the actual amount to be deducted
These rules mean a new written agreement is needed every time the amount to be deducted changes.
What has changed?
From the 30 December 2023, and by agreement with the employee, the amount to be deducted from pay no longer needs to be a set amount (e.g. it can now vary).
This means your team member can now also agree to variations of a maximum amount to be deducted or a percentage of their pay.
The benefits
These changes provide greater flexibility to vary deductions, without requiring a new written agreement every time.
It also allows for an option to create deductions on a percentage of an employee’s pay rather than a fixed amount – potentially helping to alleviate financial strain on the team member if their earnings fluctuate.
What should you do?
Existing deduction agreements (i.e. where a set amount is deducted from pay) can continue; there’s no requirement to change.
However, both parties can choose to create a new agreement to provide greater flexibility for both parties.
And if it’s all still confusing?
If you’re a business owner grappling with the intricacies of awards or concerned about the potential risks of non-compliance, don’t wait until it’s too late. Reach out to us for guidance and support as our team of experts is here to help you navigate the ever-changing landscape of employment regulations in Australia.
