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Six rules to stick to when deducting money from an employee's salary

by , 04 November 2016
Six rules to stick to when deducting money from an employee's salaryWe recently received a question from an employer who wanted to know if he could deduct damages from his employee's salary for damages to a company truck he was driving. They believe he was negligent because he didn't report that the truck's clutch wasn't working and drove even though the clutch was broken. They were going to hold a disciplinary hearing and, if he's found guilty want to deduct the costs of the damages from his salary instead of dismissing him. Can they do this?

The answer is yes. if your employee damages company property, you can make him pay for it. Just make sure you follow these six rules to do it correctly.

Urgent HR warning:
You WILL land up at the CCMA if you incorrectly deduct money from your employee's salary

Knowing what you can or can't deduct from your employee's salary can be confusing...

Once false move can cause you to land up at the CCMA and pay for the legal fees too!
But it doesn't have to be the fate of your company.

You can legally deduct money from your employee's salary starting today. Here's how...
Six rules to stick to when deducting money from an employee's salary 
Stick to these rules when deducting from an employee's salary:
  1. He must cause the loss or damage while he's working. 
  2. It must be his fault. For example you can't take money from everyone who worked with the drill before it was broken. You must identify the person and hold that person accountable. 
  3. You must give him a chance to explain and show why you shouldn't make the deductions. If he doesn't give a satisfactory explanation, you can go ahead and deduct. 
  4. You must have your employee's written agreement to dock his pay.
  5. You can only deduct a quarter of the worker's pay at a time. 
  6. You can't deduct even a cent more than the sum of the actual loss or damage. You can add interest where applicable, but you can't decide to take off extra money as a penalty. 
But there are occasions you don't need an employee's written agreement...
You don't need written consent, in these five instances
  1. You accidentally overpay him. 
  2. He pays union dues. 
  3. Deductions required by law: UIF and tax. 
  4. A deduction authorised by an arbitration award or court order e.g. a garnishee order for child maintenance. 
  5. You've proven that he owes you for loss or theft but he refuses to give his written consent to the deductions from his pay. 
Let's look at what happens if an employee leaves before he pays you back…
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What happens if your employee leaves before working off the balance he owes you? 
You have two options if he leaves before paying you back:
Option 1: Write the loss off; or
Option 2: Deduct the money from his final paycheck. You can deduct all outstanding money from his final paycheck, instead of issuing a summons and incurring legal costs suing him for the balance. 
You should always make sure you have a clause in your employment contracts or collective agreements to make deductions from losses an employee causes. For a sample clause to include in your employment contracts, simply click here.

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