Authority to Deduct For Saving Scheme

As part of our membership benefits, we provide legal opinions on many areas of concern for clarification and interpretation

Whether “the Resort” is required to comply with a request from “ the Union” to deduct money from workers wages towards a “saving scheme” incidentally introduced by the Union.
1. Legislative Provision(s) relating to ‘Deductions’ under the Employment Relations Promulgation 2007 ( “ ERP”)

1.1 Section 47 of the ERP provides as follows:

Authorised deductions from wages

47.—(1) An employer may—

(a) deduct from the wages of a worker an amount due by the worker in respect of any tax or deduction    imposed by law or ordered by a court;

(b) with the written consent of the worker, deduct an amount due by the worker as a contribution to a provident fund, school fund, pension fund, sports fund, superannuation scheme, life insurance or medical scheme, credit union, trade union, co-operative society or other funds or schemes of which the worker is a member and must on behalf of the worker pay the amount so deducted to the person empowered to collect amount or entrusted with the management of the fund, scheme, trade union or cooperative society;

(c) make deductions from the wages of a worker to the extent of an over-payment made during the immediately preceding 3 months by the employer to the worker by the employer’s mistake; or

(d) make deductions at the request in writing of the worker—

(i) in respect of articles or provisions purchased on credit by the worker from the employer;

(ii) in respect of charges for the cost of accommodation, fuel or light supplied by the employer and used by the worker; or

(iii) in respect of food or victuals cooked, prepared and eaten on the employer’s premises.

(2)     The price or cost which the employer charges a worker for articles or provisions must not exceed the lowest price at which the employer would sell articles or provisions retail to a member of the public.

(3)     The total deduction in respect of accommodation, boarding, fuel and light must not exceed 15% of the worker’s wages in respect of one wage period, and 5% for accommodation or board.

(4)     If—

(a) an employer makes a loan to a worker;

(b) the total amount of the loan has been paid by the employer to the worker in cash or by cheque; and

(c) a memorandum of the transaction has been made and signed by or on behalf of both   employer and worker providing for the repayment of the loan by one or more instalments, the employer may deduct from the wages due to the worker the instalments at the times set out in the memorandum.

(5)     Any deductions made under subsection (1) and other deductions permitted by this Promulgation must not be, in a wage period, more than 50% of the wages due to the worker in respect of the wage period except for housing purposes from an approved lender, where the deductions permitted may be up to 75%.

1.2 In our view, the wordings of Section 47 are clear, in that if a Worker authorizes in writing that a percentage of his/her pay be deducted towards a superannuation, credit union or any other funds or scheme that the worker is a member of, then such deduction ought to be made to the person entrusted or empowered to collect the said amount.

1.3 As per the letter dated 15 February 2017, Mana Island Resort has been requested to deduct monies towards a “saving scheme” introduced by the Union.

1.4 In our view, the ERP does not require that any agreement subsist between an employer and a union to enable such deductions to be made. The only requirement is, for the worker to provide to the employer a written consent for deduction(s). Ideally the written consent will contain full details of amount to be deducted, explicate the purpose of deduction and to whom such deduction is to be made.

2. Union’s Powers to Operate a “Saving Scheme”?

2.1 For purposes of this opinion, we have reviewed the Union’s powers and general objectives under its Constitution and Rules. We note that pursuant to the provisions therein, the Union has the power to inter alia:

“establish superannuation schemes, contributory or otherwise for officers and servants of the Union”

2.2 “superannuation fund” means any superannuation fund established for the benefit of employees of any employer and approved for the time being by the Commissioner of Inland Revenue under the provisions of Section 110 of the Income Tax Act.[1]

2.3 To this extent, we do not believe that superannuation functions in the same manner as a credit union scheme or a savings scheme.

2.4 In any event, having read the Union’s Constitution, it is apparent that the Union does not have the powers to establish a savings or credit union scheme for its members. The superannuation scheme that it can establish under its constitution is only designed for its own officers and servants (workers). This benefit does not extend to the members of the Union.


Having read the ERP, FNPF Decree and the Union’s Rules and Constitution, it is our view that in this case, the Union’s own Constitution and Rules does not permit it to establish and maintain a credit union scheme or savings scheme.

In order for the Union to establish a credit union scheme, it must also be registered for this purpose under the Credit Union Act.

Consequently, the Union cannot then demand that the Employer make deductions towards a scheme that it is not entitled to establish.

[1] As defined in Estate & Gifts Duties Act