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Pay Deductions

Almost all states have laws regulating how, when, where, and how often employees must be paid. The state laws and regulations vary greatly in this regard. However, all state laws provide for certain paycheck deductions. The federal government requires employers to withhold federal income taxes and social security taxes or courtordered attachments against the employee's wages to pay debts, or spousal or child support. The state law may make similar requirements for the employer.

Most states also allow employers to deduct amounts (only if it is agreed on and consented in writing by the employee) for health and life insurance premiums, hospital and surgical insurance, union dues, credit union contributions, stock purchases, and retirement and other benefit plans. The benefit plans should benefit the employee, not the employer. There may be deductions for repayment of loans to the employer (if it is in written that the employee has taken the loan).

In most states, employers are prohibited from deducting money from an employee's pay for disciplinary reasons. In some states, employers are allowed to deduct money from an employee's paycheck to compensate for monetary losses that the business suffered due to the employee's dishonesty or negligence. Deductions must be spread out over a series of paychecks, so that the amount the employee receives during a given pay period does not fall below the minimum wage.

Amounts that cannot be deducted

Most states strictly limit what employers can deduct from an employee's wages. The regulations prohibit deductions due to:

  • Business losses
  • Breakage, shortage or thefts caused or committed by some third party
  • An inducement to get or keep the job
  • Medical examinations required by the employer
  • Medical expenses for work-related injuries
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