A recent decision in the Federal Court of Australia reinforces the need for employers to have well-defined policies, secure written agreements and clear communication with employees regarding pay structures and wage deductions.

The Fair Work Act 2009 (Cth) (FW Act) allows an employer to deduct an amount from an employee’s wages if it is:

• mutually agreed, e.g. salary sacrifice arrangements and voluntary contributions to an employee’s superannuation fund;
• allowed under an enterprise agreement or modern award; or
• permitted under other legislation.

In Wollermann v Fortrend Securities (2025), an employee brought proceedings claiming that money had been unilaterally deducted from his wages. In March 2015, the employee noticed a discrepancy in the wages he received for the month. When he raised this with his employer, he was informed that there had been a deduction for the cost of a flight he took earlier that month to see a client. The employer informed the employee that travel and client entertainment expenses were his financial responsibility.

Following this, the employer notified the employee that it was amending the employee’s pay structure, and going forwards, $500 would be deducted from his pay each month to be allocated to a client entertainment and travel account. If the employee submitted valid expenses, the money would be reimbursed to him. These deductions continued until the employee’s employment termination in 2022, at which time the employee commenced proceedings to recover the deducted wage amounts.

At trial, the employer submitted that the employment contract provided that the employee was required to comply with all policies and procedures, and under this clause, it was entitled to implement policies concerning a client entertainment budget. Additionally, it submitted that the FW Act allows an employer to deduct an amount from an employee’s wages if the deduction is authorised in writing by the employee and is principally for the employee’s benefit. While not in writing, the employer submitted that the employee’s silence constituted authorisation for the deductions.

The Court rejected these submissions, as there were no clauses in the employee’s employment contract that would permit any reduction in his pay, nor any evidence that the employee had provided written authorisation for the monthly wage deduction. The Court also made it clear that an employee’s silence and conduct could not be recognised as acceptance of the variation to his employment contract, and the employee’s actions did not satisfy the deduction requirements under the FW Act. Additionally, it rejected the notion that an employer’s policies could vary an employee’s pay terms in their employment contract.

This case highlights the importance for employers to strictly adhere to the provisions outlined in the FW Act when it comes to wage deductions. Employers must ensure that any deductions from an employee's wages are either mutually agreed upon, explicitly outlined in an enterprise agreement or modern award, or authorised under other applicable legislation. Unilateral wage deductions without clear written consent from the employee can lead to legal consequences.