What Can You Deduct From an Employee's Paycheck?
Learn the rules on deducting for uniforms, advances, property damage, and more.
Can your company deduct the cost of uniforms or tools from an employee’s paycheck? What about deducting cash register shortages? Surely, it’s acceptable to deduct any amount the employee owes the company, right?
Not necessarily. Under federal law, the general rule is that employers may deduct certain expenses from their employees’ paychecks, as long as the deductions don’t bring the employee’s earnings below the minimum wage. (However, there are some exceptions, as explained below.)
Some states have laws that are more protective of employees. For example, some states prohibit employers from passing certain business costs on to employees. And, even in states that allow these types of deductions, employers must follow certain rules.
This article explains the basic paycheck deduction rules employers must follow. To find out what your state allows and prohibits, contact your state department of labor.
Deductions for Uniforms
Under federal law, employers may deduct the cost of a uniform (including the cost of having it cleaned and pressed) from an employee's paycheck, as long as the employee's wages after the deduction don't fall below the minimum wage. If an employee earns the minimum wage, the employer may not require the employee to pay for a uniform, through payroll deductions or otherwise.
Some states have stricter rules. In New Jersey, for example, employers may not require employees to buy or pay for a uniform that has a company logo or is unsuitable for street wear. And, a number of states don't allow employers to charge employees for uniforms under any circumstances. In these states, the cost of uniforms is considered a business expense, which must be borne by the employer.
Deductions for Tools and Equipment
The same federal law that applies to uniforms applies to work tools, Employers may require employees to pay for tools and equipment, whether through payroll deductions or otherwise, but only if the employee's pay after deductions is at least equal to the minimum wage.
State laws differ here as well. Oregon employers, for example, may require employees to pay for their work tools if the employee earns more than the minimum wage. However, Oregon employers may not accomplish this by withholding money from the employee’s paycheck. In California, employers must provide all tools and equipment necessary to perform the job; employees can't be required to pay at all.
Deductions for Cash Register Shortages and Breakage
Some employers charge employees for items they break or for shortages in their cash register drawers. Under federal law, employers can charge the employee for these losses, as long as the employee is still earning at least the minimum wage.
A number of states are more protective. Some states require employers to get the employee's consent, in writing, before they can deduct the cost of broken goods or cash register shortages from the employee's paycheck. Some allow these deductions only if the employee admits to being responsible for the loss or shortage.
California doesn't allow these deductions at all. Unless the employer can show that the employee acted dishonestly, willfully, or in a grossly negligent manner, these costs may not be passed along to employees.
Deductions for Lodging and Meals
Under federal law, there’s an exception to the general rule that paycheck deductions cannot bring an employee’s pay below the minimum wage. Employers may deduct the cost of providing lodging and meals to employees, even if that causes the employee to take home less than the minimum wage. In fast food restaurants, for example, many employees work minimum wage jobs—and employers often charge employees the cost of one meal per shift.
Employers may deduct meals and lodging only if they are being provided primarily for the benefit of the employee and only if it is customary in the industry to provide those items to employees. And, the employer may deduct only the reasonable cost of providing the items, not what it would charge the public.
Most states follow the same rule, but some are more protective. In California, for example, employers may take deductions for meals and lodging only if employees voluntarily agree, in writing, to the deductions. And, some states place limits on how much an employer can deduct.
Deductions to Pay Back a Debt
Employer loans are another exception to the general rule that deductions cannot reduce an employee’s wages below minimum wage. If an employee owes your company money—for a salary advance, for example—the company can withhold money form the employee’s paycheck to pay itself back, even if the employee’s earnings would fall below minimum wage.
Some states prohibit paycheck deductions for debts to the employer, or limit the circumstances under which these deductions may be made. For example, state law might require employers to secure the employee’s agreement, on a signed consent form, to withhold this money.