When you consider payroll deductions, taxes and health insurance premiums may be the first things that come to mind.
Of course, many employers also wonder about wage deductions for losses, damages, and mistakes. Then there are items like uniforms and voluntary deductions—how exactly do you handle them?
What else are employers permitted (or not) to withhold? Wage deduction laws vary by state, so you must understand your local laws and regulations before taking anything from employee paychecks. Read on for payroll deduction guidelines for Maine, Massachusetts, and New Hampshire employers.
Maine Payroll Deductions
Maine law states that an employer may not withhold or deduct an employee’s wages for:
- Cash shortages
- Inventory shortages
- Dishonored checks
- Dishonored credit cards
- Any type of damage to the employer’s property
- Any merchandise purchased by a customer
An employer can only deduct or withhold an employee’s wages for:
- Taxes and garnishments
- Insurance premiums, 401(k) contributions, or another benefit plan that the employee has agreed to pay via written authorization.
- The payment of a loan, debt, or advance made to the employee.
- The payment of any merchandise the employee voluntarily purchased from the employer.
- Rent, light, or water expense of a company-owned house or building.
Additionally, Maine employers cannot require employees to pay for:
- Required uniforms (i.e., shirts or other items of clothing with the company name or logo).
- Equipment or tools necessary for the job.
- Cleaning and maintenance of uniforms.
However, an employer and employee can enter into a signed agreement with the employee to deduct the cost of uniform cleaning and maintenance from their wages.
Massachusetts Payroll Deductions
Massachusetts employers may only make payroll deductions when the employee owes the employer “a clear and established debt.” Employers cannot deduct wages for:
- Cash shortages
- Inventory shortages
- Dishonored checks
- Dishonored credit cards
- Any type of damage to the employer’s property
- Any merchandise purchased by a customer
Permitted payroll deductions include:
- Income taxes
- Health insurance premiums
- Labor, trade union, or craft dues and obligations
- Meals and lodging, subject to specific restrictions. No deduction for meals may exceed the actual cost to the employer.
Unlike Maine, the Bay State does not prohibit employers from requiring employees to pay for a uniform. However, an employer cannot:
- Require an employee to put down a deposit for a required uniform unless approved by the Mass. Department of Labor and Workforce Development.
- Force an employee to pay for the maintenance of uniforms requiring dry cleaning, commercial laundering, or other special treatment if the cost reduces the employee’s effective rate below minimum wage. (This restriction does not apply to “wash and wear” uniforms.)
New Hampshire Payroll Deductions
New Hampshire law does not allow employers to deduct any of the following from an employee’s wages:
- Cash shortages
- Breakage, damage, or loss of the employer’s property
- Dishonored or returned checks
- Required uniforms (i.e., clothing with a company logo or distinctive design)
Granite State employers can only withhold or deduct an employee’s wages if:
- The deduction is required by state or federal law.
- The employee has consented in writing to any of the following deductions:
- Union dues
- Health, welfare, pension, and apprenticeship fund contributions
- Voluntary contributions to charities
- Housing and utilities
- Payments into savings funds held by someone other than the employer
- Voluntary rental fees for non-required clothing
- Voluntary cleaning of uniforms and non-required clothing
- Voluntary childcare fees to a licensed childcare provider
- Voluntary parking fees
- The employee’s use of a vehicle under NH Statute 261:111
- Required clothing not covered by the definition of a uniform worn by one or more employees and serving as a means of identification or distinction
- Voluntary legal plans and identity theft plans
- For hospital employees only, pharmaceutical items, gift shop, and cafeteria items purchased at a hospital by hospital employees
- Contributions to a political action committee
- The employee works for a charitable organization and authorized the withholding of wages as a voluntary contribution to the charity where they work.
- The employee has authorized the deduction in writing for the employee’s benefit for any legal purpose that the employer and employee mutually agree on that offers no financial advantage to the employer. Employers must keep a record of the deductions and may not use the withholding to offset payments used to purchase items required to perform the employee’s job.
- It is a legal deduction for medical, surgical, or hospital insurance, offers no financial benefit to the employer, and is clearly recorded.
- The deduction is for voluntary installment payments of legitimate loans made by the employer to the employee, which must be recorded in a document including:
- The time the payments will begin and end.
- The amount to be deducted.
- A specific agreement regarding whether the employer can deduct any amount outstanding from final wages at the termination of employment.
- The deduction is for voluntary payments for the recovery of an accidental overpayment of wages, provided that:
- The recovery is agreed to in writing
- The deduction for the overpayment begins on the pay period following the date
- The written agreement specifies:
- The start and end dates for the recovery of the overpayment.
- The amount to be deducted, which must be agreed upon by the employer and the employee but must never be more than 20% of the employee’s gross pay in any pay period.
- A specific agreement stating if the employer is allowed to deduct any amount outstanding from final wages at the termination of employment.
- Voluntary tuition repayment for non-required educational costs that the employer pays to an educational institution on behalf of the employee. The specific deduction must be authorized in a written document that states:
- The payment start and end dates
- The deduction amounts
- A specific agreement stating if the employer is allowed to deduct any amount outstanding from final wages at the termination of employment
- Voluntary payments for the employee’s use of a health or fitness facility that the employer sponsors for the benefit of its employees and that is located within the employer’s facility or workplace, or operated by a private health and fitness facility that offers discounted memberships of 50% or more to all employees of the employer, as outlined in a document that includes:
- The payment start and end dates
- The deduction amounts
- A specific agreement stating if the employer is allowed to deduct any amount outstanding from final wages at the termination of employment
Note that employers are also limited in what deductions they can withhold from a salaried employee’s pay. You must pay a salaried employee their full salary for any period in which they perform any work, regardless of the number of days or hours worked, except for the following instances:
- Any pay period in which the employee performs no work.
- When an employee receives a disciplinary suspension without pay under the Fair Labor Standards Act for any portion of a pay period, written notification is given to the employee at least one pay period in advance, and the suspension is in full-day increments.
- Any portion of a workday or pay period for leave taken under the Family and Medical Leave Act.
- If the salaried employee, voluntarily and without coercion, requests time off without pay for any portion of a pay period after having exhausted all other earned leave time to which they are entitled.
- If the salaried employee is either hired after the beginning of a pay period, terminates the employment of their own accord, or is fired for cause, which would allow the employer to prorate the employee’s salary.
Do you have questions about your state’s payroll deduction laws? Our human resources specialists will ensure your employees’ withholdings are compliant with state and federal law. Contact us today to discover how we can help your organization at 603-818-4131 or info@bluelionllc.com.
The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.
