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Summary of differences between federal and state regulations
Federal regulations restrict the types of deductions that can be made from an employee’s wages or salary. Deductions can be made in certain cases, but the legality often depends on the nature and purpose of the deductions, as well as the status of the employee as exempt or non-exempt.
Indiana law says that a wage assignment, or authorized deduction of wages by an employee, must be in writing, signed by the employee, revocable by the employee in writing at any time, and agreed to in writing by the employer.
If an employer has overpaid an employee, the employer may deduct from the wages of the employee the amount of the overpayment. However, the employer must give two weeks notice, and may not deduction more than 25% of the employee's disposable wages, or may deduction only the portion of the employee's wages in excess of 30 times the federal minimum wage.
An employer may not assess a fine against an employee on pretext and deduct the amount of the fine from the employee’s wages.
Effective May 1, 2019, wage deductions for clothing and tools may be made for the rental of uniform shirts, pants, and job-related clothing. Employers may make a wage deduction for the purchase of equipment or tools necessary to fulfill the duties of employment. Employees must not, however, be charged or subject to a wage deduction for personal protective equipment except for those instances allowed under federal rules. Total wage deductions under this revised law are capped at $2,500 per year or five percent of an employee’s weekly disposable earnings (whichever is less).
Wage assignments may be made for insurance, charity, purchasing bonds or securities issued by the U.S., to purchase stock of the employer, union dues, to purchase employer merchandise, health insurance, to pay a loan, and others listed. As of July 1, 2015, wage assignments may also be authorized for the following purposes:
- The purchase of uniforms and equipment necessary to fulfill the duties of employment, not exceed $2,500 per year or 5% of the employee's weekly disposable earnings.
- Reimbursement for education or employee skills training. However, a wage assignment may not be made if the education or employee skills training benefits were provided, in whole or in part, through an economic development incentive from any federal, state, or local program.
- An advance of payroll or vacation pay.
The interest rate charged on amounts loaned or advanced to an employee may not exceed the bank prime loan interest rate as reported by the Board of Governors of the Federal Reserve System or any successor rate, plus four percent (4%).
State
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Regulations
Indiana Code 22-2-6, Chapter 6. Wage Deductions
Indiana Code 22-2-7, Chapter 7. Assignment of Wages
Indiana Code 22-2-8, Chapter 8. Deduction From Wage Payments
Federal
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Regulations
For non-exempt employees:
29 CFR Part 531, Wage Payments under The Fair Labor Standards Act of 1938
For exempt employees:
29 CFR Part 541, Subpart G, Salary Requirements