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Deductions From Wages ~ Employer Benefit vs Employee Benefit

edited October 2010 in General Payroll Topics
Does anyone know how to define the difference between a deduction that is for the benefit of the employer vs the benefit of the employee? Eg. Our employees can elect to automatically swipe for thier meals and agree to have this withheld from thier biweekly paycheck. I would assume (big word :) ) that this would be considered for the benefit of the employee and we would be allowed to take this deduction even if it dropped the check to below minimum wage times hours worked. Employees can also elect to have thier bill for hospital services provided to the employee or employees family automatically deducted from thier check. On the form that they sign for the deduction they agree that thier final check will be withheld for payment of these bills if they terminate before the bill is paid. Would this be for the employers benefit or the employees benefit? (I am assuming that this would be for the employers benefit). One more deduction is for tuition assistance. Employees who receive tuition assistance benefits and do not meet the requirements (grades, time employed post award) also sign a form that says we will withhold from the employees check these funds in the event that the requirements were not met. Employer or Employee benefit?


  • Think about where the rules came from - back in the old days employment might be in isolated areas - and the company owned everything - housing, the company store, required tools, uniforms, etc. and no matter how hard or long employees worked, they could not make enough to cover the deductions from the paycheck that went right back to the company -

    So, if your employer requires you to buy the shovel you only need in order to do your job as the employer's ditch digger, the amount the employer takes from your paycheck to pay for the shovel any given workweek cannot impair minimum wage and overtime pay. On the other hand, if you want to buy the shovel from your employer for digging in your garden, that is a voluntary deduction and can take your check to zero.

    If your employer could deduct the cost of the benefit, without including it in wages, if the employer had simply paid for it, the deduction is likely for the employer's benefit - that is, it is an ordinary and necessary cost of doing business. That was an oversimplification - but historically that is what it is about.
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