Pay deductions and overpayments might seem like an unfortunate occurrence to an under resources payroll function, but they don’t have to be with an efficient solution in your corner. If your business is facing these instances far too frequently, let’s identify what pay deductions and overpayments look like, and review an actionable guide to navigating these circumstances.

Legal and regular occurring pay deductions

It’s important to remember that some pay deductions occur each pay cycle, and are in a different category to those discussed here. Some of these pay deductions include tax and superannuation. These facts you may know, but let’s go over the basics. Your employer is legally obligated to contribute to your superannuation, with a 9.5% contribution set as the benchmark. There are some sectors, like government and not-for-profit that can contribute higher at up to 11.55%. Like superannuation, tax is deducted from your pay before you receive it, with the withheld amount accessible in part at tax time based on your annual earnings and deductions.

Business goods and services deductions

Pay dedications might sound like a loss, but in many cases, they can serve employees very well as a gain. Business goods and services deductions allow employers to take pay deductions from wages, contributing them towards other services that can be redeemed by employees. These can include health insurance, transport costs, car payments and even gym memberships. In fact, employers are getting more creative with services they can offer their employees, noticing that it’s not higher salaries that are gaining the attention of great candidates but rather flexibility and add-ons. Pay deductions of this kind are available as an opt-in, and not rolled out with every employee if they are not approved by that employee.


Overpayments can happen from time to time, and if dealt with swiftly there is no impact to the business or employee in question. This can occur due to a payroll error, or the employer believing that the employee was entitled to more. From here, the employer and employee must discuss how the overpayment will be handled, and in what capacity the money will be paid back to the employer. If the employee agrees to pay back the amount, they must write written consent for a deduction to be made from their account. This written consent should include the amount that was overpaid, the circumstances that made this occur, and how the employee wishes to make the payment (cash, money transfer, Cheque, etc). In the very unlikely event that the employee does not wish to return the overpayment, an agreement will need to take place with legal counsel present.

Just because payroll is a regular occurrence, does not mean that it doesn’t come with complications from time to time. If you would like to explore an outsourced payroll solution that controls and minimises these discretions, contact i3 Group for a free trial. We look after many complex payrolls and add rigour to stagnant processes so that you and your employees get a correct and timely payroll solution.

Interested in more payroll advice for your HR department? Check out our master guide here!