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Is a deduction from pay permitted

Is a deduction from pay permitted

If one were to implement company credit cards, is it permissible to make a deduction from an employee not only to cover unauthorised personal use of the card, but also to charge an 'admin' fee for so doing?

I have, in the past, made deductions for personal use - subject to the employee having explictly signed an agreement - but nothing further.

Thanks in advance,

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26th Mar 2012 12:39

if you have it as part of the agreement

If you have it as part of the agreement in advance of issue that misuse will result in a deduction from wages and an admin fee for doing so, then I'd say OK.

Some HR people would have you seeking written permission before the deduction as well. Seems OTT to me.

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26th Mar 2012 13:01

NMW

Just be careful that their wage doesn't fall below NMW as a result of the deduction.

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26th Mar 2012 13:11

NMW?

Surely this is not relevant as the deductions will form part of the net salary.

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26th Mar 2012 13:18

net pay?

why would the deduction be from net pay? The employee is suffering a pay-cut (negative bonus) due to a contractual arrangement with his employer. So the deduction will be from GP, and can't bring the wage below NMW.

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By Hansa
26th Mar 2012 13:57

Recovery of unauthorised expenditure = loan repayment

I was somewhat astonished to see some of the responses above suggesting that the recovery of unauthorised expenditure as having something to do with their gross pay.   Think again!

If an employee borrows from the company, normally the amount is repaid from nett salary.  ie Gross-deductions-nett are calculated and from that nett amount, the repayment is effected.  There can be no other way of doing it.

In this case, the unauthorised expenditure is in effect the company is loaning the employee (via the credit card) the sum of the unauthorised expenses, and at the end of the month the employer is simply recovering this loan.  It therefore cannot have anything to do with gross salary or statutory deductions thereon.

The question of charging an admin fee I think HAS to be notified to employees ahead of any such charge being levied ... perhaps a general internal memo given individually to each employee spelling out the consequences of using the company card for personal benefit.  I would have thought a fiver or tenner would be painful enough to stop the practice!  Again, this has nothing to do with the salary, but is a contractual charge (maybe plus VAT) and thus from nett pay.   It may just be easier to remove the card from the offender in future!

 

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DKB-Sheffield
26th Mar 2012 19:18

answering the question

Hansa wrote:

I was somewhat astonished to see some of the responses above suggesting that the recovery of unauthorised expenditure as having something to do with their gross pay.   Think again!

If an employee borrows from the company, normally the amount is repaid from nett salary.  ie Gross-deductions-nett are calculated and from that nett amount, the repayment is effected.  There can be no other way of doing it.

In this case, the unauthorised expenditure is in effect the company is loaning the employee (via the credit card) the sum of the unauthorised expenses, and at the end of the month the employer is simply recovering this loan.  It therefore cannot have anything to do with gross salary or statutory deductions thereon.

The question of charging an admin fee I think HAS to be notified to employees ahead of any such charge being levied ... perhaps a general internal memo given individually to each employee spelling out the consequences of using the company card for personal benefit.  I would have thought a fiver or tenner would be painful enough to stop the practice!  Again, this has nothing to do with the salary, but is a contractual charge (maybe plus VAT) and thus from nett pay.   It may just be easier to remove the card from the offender in future!

 

I was somewhat astonished that you didn't read the question. Obviously, recovery of unauthorised expenditure would be from net pay; i.e. the company is recovering the loan. But the question was whether an admin fee (effectively a fine) could be charged. If this is done as a deduction from salary (or a reduction in bonus) then this will be a deduction from GROSS pay. 

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26th Mar 2012 15:09

aiwalters

I'm glad you don't do our payroll!  Have fun when the tax man comes round.

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JBOWDEN88
26th Mar 2012 19:20

also didn't read the question

Richard Willis wrote:

I'm glad you don't do our payroll!  Have fun when the tax man comes round.

Obviously I wasn't talking about recovery of personal expenses. I was talking about the "fine" imposed on the employee for the abuse. That was the question.

Whilst I accept that it could be structured differently, if a "fine" is imposed, then it will be a deduction from GP not net pay.

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26th Mar 2012 16:05

Fine versus Personal Expense

It may be that aiwalters thinks the admin fee is a fine and may be deductible from GP. Can't think why I'd take that risk in thinking that way though. However the personal expense is definitely from Net Pay and NMW regs may require that the deduction is spread over a number of pay periods.

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By tom123
26th Mar 2012 18:43

Interesting comments

Thank you everyone - I think in the main the hope is that the 'admin' fee acts as such a strong deterent that nobody misuses the card,

We will ensure that everyone getting the card fully understands 'our' rules,

 

Rgds

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26th Mar 2012 19:54

What has an admin fee got to do with pay?  Surely it is arguable that it a completely separate transaction from pay agreed to by the employee, but just using the payroll mechanism to recover the cost

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26th Mar 2012 20:07

VAT.....?

If there is an admin fee being charged to the employee then are we not getting into VAT issues here OR if they are sacrificing salary would that too cause VAT implications.

Maybe I am worrying too much but I am sure the VATman would be interested......

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