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After participating in the Extended DISC workshop I found that I now have some powerful tools that will help me quickly determine how to best engage another person.

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 Company vehicle accidents - Who pays the excess?

Providing employees with the use of a company vehicle is often perceived as being a major workplace benefit. However:

- what happens if an employee is involved in a car accident whilst using a company car?

- Who is responsible for footing the insurance bill?  

- If an employee is found to be at fault for the accident, can the insurance excess be deducted from their wages?

In most instances, it is the employer who will be liable for any damages caused and costs incurred when a company vehicle is involved in an accident. Employers are encouraged to tread very carefully when it comes to deducting any non-legislated amounts from an employee's wages. 

As a general rule, an employer cannot make any deduction from an employee’s wages without the employee having provided specific authority. However, even when this authority is obtained, such a deduction can only be made by an employer for the purpose of paying a third party for the benefit of the employee.

Many workplaces do have a motor vehicle policy in place which will provides that an employee will be required to reimburse the company for any insurance excess incurred which relates to a company vehicle accident for which they are at fault. However in practice, such a term, whether in policy or the employment contract, may be deemed to have no effect as it could be argued that such a deduction does not ‘pertain to the employment relationship’. This is because:

  • The insurance policy relates to the employer in the capacity of being the insured party
  • The payment is dependent on the terms of an insurance policy held by the employer and to which an employee is not a party.

In addition, any requirement for an employee to reimburse their employer an amount for excess applied by an insurer could contravene the Fair Work Act 2009.

The Act states that an employer must not directly or indirectly require an employee to spend any part of an amount payable to an employee in relation to the performance of work if the requirement is unreasonable in the circumstances. A term of a modern award, enterprise agreement or a contract of employment will have no effect to the extent that the term allows an employer to make a deduction from the employee's work-related pay or that requires the employee to make a payment to a third party, if the deduction or payment is directly or indirectly for the benefit of the employer, or a party related to the employer, and it is unreasonable in the circumstances.

The Fair Work Regulations 2009 does provide examples of the types of payroll deductions that may be considered reasonable, including:

  • A deduction that is made in respect of the provision of goods or services by an employer, or partly related to an employer, and to an employee, and the goods or services are provided in the ordinary course of the business of the employer or related party, and the goods or services are provided to members of the public on the same terms as those on which the goods or services were provided to the employee, or on terms and conditions that are not more favourable to the members of the general public
  • A deduction of health insurance fees made by an employer that is a health fund
  • A deduction for a loan repayment made by an employer that is a financial institution
  • The deduction is for the purpose of recovering costs directly incurred by the employer as a result of the voluntary private use of particular property of the employer by an employee (whether authorised or not). This may include:
    •  the cost of items purchased on a corporate credit card for personal use by the employee,
    • the cost of personal calls on a company mobile phone.

In addition to the above, lawful payroll deductions would also include:

  • Taxation - as it is a legal requirement for an employer to deduct monies from an employee’s wages to comply with federal tax laws and to deduct PAYG instalments.
  • Garnishees or a court order that requires an employer to withhold part of the wages owed to an employee (the debtor) and instead pay the amount to that employee’s creditor or the court in satisfaction of a debt.
  • Department of Human Services child support - DHS can order an employer to deduct money from an employee’s wages or salary and send it to the DHS.
  • Commonwealth government payments when an order is issued by the Commonwealth.
  • Salary sacrifice provided that the arrangement does not involve a contravention of the Fair Work Act 2009:

For assistance with ensuring you are meeting your obligations please contact us at [email protected] or 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.

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