Section 88 of the Employment Act (Chapter 373) is exhaustive: a deduction not within it, or not made under another law, is unlawful and an offence under section 96(c).
Section 88(1) — the permitted deductions
| Deduction | |
|---|---|
| (a) | Contributions to a provident, medical or pension fund, or to any scheme approved by the Secretary |
| (b) | Food rations, clothing and other articles issued under Part IV Divisions 5 and 6 and in accordance with registered awards |
| (c) | Any amount paid to the employee in error as wages in excess of what was due |
| (d) | Subject to any direction by the Secretary — a shortage of money due to the negligence of the employee, where his contract specifically provides for his being employed in connection with the receipt, payment and custody of money |
| (e) | Deferred wages — for an employee under an attested contract only |
| (f) | Rental for housing provided under Part VIII |
| (g) | Cost of repatriation where the employee is not a citizen |
| (h) | Any other prescribed items |
| (i) | Any advance paid to the employee under section 87 |
It applies only to a shortage of money, only where caused by the employee’s negligence, only where the contract specifically provides for employment in connection with the receipt, payment and custody of money, and it is subject to any direction by the Secretary.
It does not cover damage to goods or vehicles, stock losses, breakages, lost tools or lost keys. Deducting for those is unlawful — and if characterised as a penalty, is an offence under section 94.
Section 88(2) — prior written consent
Deductions under subsection (1) shall not be made unless the employer has first received the written consent of the employee — and, in the case of an employee employed under an attested contract, that consent has been witnessed by a labour officer.
Three requirements: the consent must be written, it must be obtained first, and for attested contracts it must be witnessed by a labour officer. A consent signed after the money has gone does not validate the deduction, and a general clause buried in a contract signed months earlier is a weak foundation for a specific deduction now.
Section 88(3) — deductions required by law
An employer may, whether or not the employee consents, deduct any amount that the employer is required or empowered to deduct under any law in force in Papua New Guinea.
This covers salary or wages tax, and deductions under a court order such as a garnishee or a maintenance order. No consent is required — but the employer should be able to identify the law or order relied on, and section 82(d) still requires the reason to appear on the pay statement.
Section 88(4) — the overall cap
Notwithstanding any other law, but subject to any right of recovery by the employer of a debt due to him, the total of all deductions made under this Part shall not exceed 50% of the wages due to be paid to the employee for any pay period — plus such additional amount (if any) as the Secretary may declare, generally or for a particular employer, employee, class, trade or industry.
Half the pay packet is the floor the worker takes home, subject only to a declaration by the Secretary. Within that overall cap, section 87(3) imposes a tighter limit for advances: no more than 25% of net wages for any pay period may be deducted to recover an advance.
Sections 91 and 94 — what may never be deducted
An employer shall not make any deduction by way of discount, interest or similar charge in consideration:
(a) for any advance of wages;
(b) as a reward for providing employment for the employee; or
(c) for retaining the employee in employment.
An employer who imposes a fine of any kind on an employee is guilty of an offence. Penalty: a fine not exceeding K500.00.
Charging a worker for lateness, breakages, damage, poor performance, or a “disciplinary penalty” falls squarely within this.
Related prohibitions: section 92 — an employer must not limit or attempt to limit the employee’s right to dispose of his wages, and must not compel purchases from the employer’s shop (fine up to K500.00); and section 116 — an employment agent must not charge a fee to a worker.
Section 89 — the employer must hand the money over
Any deductions made under section 88(1)(a) — provident, medical or pension fund, or an approved scheme — shall be paid as soon as practicable by the employer to the person or fund entitled to receive them.
Deducting superannuation or fund contributions and not remitting them is a breach of section 89 and a contravention of the wage provisions under section 96(d). Ask for the fund statements and compare them with your pay statements.
Refundable deductions
- Section 14(h) — the arrangements proposed in respect of refundable deductions must be disclosed at hiring, and must appear in the contract under section 21(1).
- Section 90(1) — deferred wages must be paid on the employee’s request, with a labour officer’s approval.
- Section 90(2) — repatriation deductions must be refunded in full after the earlier of the contract’s expiry or two years from engagement, or on termination under section 35 or 36 — except that on a section 36(1) termination the employer may apply what is needed for the journey and must refund the rest.
- Section 85 — a payment of deferred wages made otherwise than in accordance with Part V is not a valid discharge to the employer.
Checking a deduction
- Which paragraph of section 88(1) does it fall under? If none, and it is not required by law, it is unlawful.
- Did you give prior written consent? For an attested contract, was it witnessed by a labour officer?
- Is the reason stated on the pay statement, as section 82(d) requires?
- Do all deductions together stay under 50% of the wages for the period?
- For an advance, is the recovery within 25% of net wages?
- Is it really a fine? If so, section 94 makes it an offence.
- Is there a discount or interest charge? Section 91 prohibits it.
- Are fund contributions reaching the fund? Section 89 requires it.
- Query it in writing, then take it to a labour officer — section 96 carries a fine up to K500.00 and section 145 lets the Secretary prosecute.
Sources
- Employment Act (Chapter 373) — ss 14, 21, 35, 36, 82, 85, 87–92, 94, 96, 116, 145; Part IV Divisions 5 and 6; Part VIII
- Industrial Relations Act — PacLII 1986 Revised Edition
- Bar v Kora [2008] PGNC 17; N3290
- Mamugoba v New Britain Palm Oil Ltd [2024] PGNC 419; N11082
Before relying on anything here, read the current text of the Employment Act (Chapter 373) and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.