Payroll Deduction: Considerations, Do’s, and Dont’s

Payroll can be a complicate part of running a business. There are many things to keep track of such as FICA, social security, and state taxes if applicable. Another thing a company may have to keep track of is a payroll deduction. A payroll deduction is any amount withheld from an employee’s paycheck by their employer for a variety of purposes. Some examples of these deductions are insurance pension contributions, wage assignments, child support payments, taxes, and union and uniform dues. Deductions that are mandated are government taxes; however, all other deducted amounts are voluntary. There are many complications that can arise when figuring out a payroll deduction. Here is some information that may help you when you encounter the need for a payroll deduction.

Required Withholdings

The first thing that should be considered when preparing a payroll deduction are the mandatory deductions and withholding a business is required to do. There are certain, mandatory payroll deductions a business must take in order to comply with local, state, and federal laws. The most common of these payroll deductions are taxes. Taxes come at different levels which depend on where an employee works and lives. These amounts must be calculated and withheld from employees. After which they are sent to the proper taxing authorities. Other mandatory deductions include any of which that are court ordered such as child support.

Employee Benefits

Employees may authorize their employers for other deductions as well. Examples of payroll deduction that are available upon employee request are 401(k) plans, insurance plans, and union dues. These are available upon opt-in for employees.


Other deductions may include required uniforms. Rather than paying for a uniform outright, an employee may opt to have the cost of the uniform be taken out of future paychecks in the way of a payroll deduction. The guidelines following this agreement should be outlined in the employee handbook, and agreed upon by the employee however. The employee must agree to all the terms following the agreement. These deductions should remain the same for all employees. If the employee is making minimum wage, they cannot be asked to set up a payroll deduction for their uniform however.

Salary Advances

Another example of a payroll deduction is recouping an advance on an employee’s salary. If an employee decides they need an advance on their salary, the company can agree to it, and recoup the losses on their next paychecks. This is considered essentially a loan by the company to the employee, and the employee must agree to the terms. These terms should include the amount borrowed, the number of payment periods it will be paid off for, and the final payment period there will be a payroll deduction for.


The workplace often has many valuable tools, equipment or hardware around. Sometimes an employee may accidentally break one of these things. In the event that an employee cannot repay the amount in full immediately, a payroll deduction is a good way to recoup the losses from the employee.


For an employee payroll deduction then, best practices include documenting the employee, the amount, and the purpose. These guidelines should be clearly outlined in the employee handbook. For any and all payroll questions and needs, visit Nazpay.



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