The first time you ever receive a paycheck can be a harrowing experience. In your head, you've already multiplied your hourly wage by the number of hours you've worked, and you're expecting to see roughly that figure.
When you don't, you wonder why your take-home pay is so much less than what you expected. The answer: deductions, or amounts your employer is either required or allowed to withhold from your paycheck. Certain deductions are required by the federal or state government or by a court order. Others are voluntary, at the option of either you or your employer.
The law places limits on voluntary deductions. The federal Fair Labor Standards Act (FLSA) requires employers to pay eligible employees at least the minimum wage for all hours worked. (Read more about the FLSA in our Wage and Hour FAQs.) Voluntary deductions that reduce an employee’s pay below the minimum wage are prohibited, with a couple of exceptions. (29 U.S.C. §§ 201 and following.)
Mandatory Deductions: FICA and Income Tax
Employers are required to make certain withholdings from their employees' paychecks. For example, employers must withhold Social Security and Medicare taxes (known as "FICA taxes") and federal income taxes and pay these amounts to the IRS.
Most states and some municipalities impose incomes tax as well, which employers must deduct from employee paychecks. State law might require additional withholding. In California, for example, a small amount from employee paychecks must go towards the state’s temporary disability program.
Paycheck Deductions for Child Support
If you're subject to a wage garnishment order, your employer must withhold money from your paycheck and send it to the beneficiary of the order.
If you owe child support, for example, a portion of your earnings can be withheld and sent to the child’s guardian. The law limits how much of your wages can be garnished, though. The limits depend on the reason for the garnishment, your earnings, and your state law.
Deductions for Uniforms, Equipment, or Tools
For non-mandatory deductions by your employer, the general rule is that your employer must leave you with at least the minimum wage. For example, under the FLSA, your employer can deduct the cost of your uniforms, equipment, or work tools from your paycheck, but only if you'd still receive at least the minimum wage per hour.
Some states don’t allow these deductions, however. In California, for example, employers must pay for all items necessary for work, including tools and uniforms.
Deductions to Pay Back a Loan or Paycheck Advance
If you ask for a loan or an advance on future wages, your employer can withhold money from your paycheck to pay itself back. As an exception to the general rule, the FLSA allows employers to take these types of deductions, even if you are left with less than the minimum wage.
However, employers may not add administrative fees that will bring your take-home pay below the minimum wage. In some states, such as California, your employer must get your written consent before making the deduction.
Voluntary Deductions Requested by the Employee
If your take-home pay falls below the minimum wage because of deductions you have requested, that’s also legal. For example, you might ask your employer to withhold money for your 401(k) retirement account, your share of health insurance or life insurance premiums, or for union dues.
Your employer may withhold these amounts even if your paycheck falls below the minimum wage as a result. Some states, including California, still require the employer to get your written authorization before making these types of deductions, however.
Deductions for Theft and Cash Register Shortages
Employers who suspect employees of committing theft or other wrongdoing cannot withhold amounts from paychecks as reimbursement or punishment. The employer must find another method to resolve these sorts of issues.
If a worker has broken an item or has a cash register shortage, federal law allows employers to charge employees for the loss, as long as the employee still earns the minimum wage. Some state restrict this practice, however, by requiring employees to consent or admit responsibility for the loss. In California, deductions for breakages or shortages aren't allowed at all unless the worker acted dishonestly, willfully, or with gross negligence.
Legal and Illegal Paycheck Deductions
As we've seen, employers are legally permitted to make a number of paycheck deductions unless prohibited by state law. Permissible deductions generally include:
- federal income taxes and FICA
- state taxes
- paying back a loan or advance
- voluntary 401(k) or IRA deductions
- cost of work uniform, equipment or tools
- child support, and
- union dues.
On the other hand, it is generally illegal for employers to make deductions for the following:
- alleged misconduct or theft
- employer-only payroll taxes
- workers' compensation premiums, and
- pre-employment medical examinations.
When to Contact an Attorney
If non-voluntary employer deductions from your paycheck (such as deductions to pay for your uniform) have left you with less than your state's minimum wage, consider asking your company's payroll department whether this was intentional. Sometimes mistakes happen and in most cases they can be quickly corrected.
If your company refuses to correct its mistake, contact an employment or tax lawyer (or your union representative) right away to protect your rights. A lawyer can negotiate with your employer and, if necessary, file a lawsuit to make sure that you receive all the pay to which you're entitled.