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Do you know why your employer deducted your wages?

On Behalf of | Jun 17, 2022 | Wage & Hour Laws

You know how much money you should see in each paycheck. When you receive less than expected, it could be because your employer took out deductions.

According to the Indiana Department of Labor, your employer can legally deduct money from your paycheck. There are several reasons why this might happen.

What are valid deductions?

An employer might withhold money from your paycheck because you participate in company programs. These include the following:

  • Company-sponsored insurance policies
  • Medical plans
  • Company stocks and bonds
  • Employer loans

In these situations, your employer could withhold the premiums that you pay each month.

Additionally, an employer can deduct the cost of a new uniform or new equipment. If you purchase goods to use at work, you may also see these expenses taken out of your paycheck.

What are unlawful deductions?

There are several situations when your employer does not have grounds to remove money from your paycheck. Sometimes, a company could fine a worker. This fine cannot come out of your wages

Additionally, there are limits to how much money a company can withhold. Your employer might overpay you by accident. The company can take back the overpayment but you have to receive notice that this will happen. Additionally, the deduction cannot be greater than 25% of your disposable income. If employers take out more, they risk violating Indiana law.

In order for deductions to be valid, you have to sign a document saying that your employer can withhold money. You also have the right to change the terms later on or to revoke the agreement. If your employers do not follow the terms, they could be in violation of the state’s employment laws.


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