Paycheck deductions are a normal part of employment, but not all deductions are legal. In Indiana, state law outlines what employers can and cannot deduct from an employee’s wages.
Understanding these rules helps workers know what to expect when they receive their pay and what they can do if they have been underpaid.
When deductions are allowed
Employers in Indiana can make deductions if they are legally required, such as for federal or state taxes, Social Security or court-ordered garnishments. Other deductions, like those for health insurance or retirement plans, are allowed with the employee’s written consent.
Indiana law also permits deductions for specific reasons, but only with a signed agreement. These include uniforms, tools or loan repayments. The agreement must clearly state the purpose and amount of the deduction.
Common examples of improper deductions
Some deductions are not allowed, even if the employee agrees to them. These include deductions for:
- Breakage or damage caused by the employee
- Cash shortages or register errors
- Costs due to customer theft
- Disciplinary penalties
An employer cannot shift the cost of doing business onto employees through wage deductions. These types of deductions may violate Indiana wage laws, even if the worker signs a statement approving them.
If a paycheck shows a deduction that was not authorized or clearly explained, it could be unlawful. Indiana employers are expected to follow specific rules before making any deductions that are not required by law. Workers can request a breakdown of their deductions to better understand where their wages are going.
If you have been underpaid, it may be time to look into your legal options.
