4.8 Non-Mandatory Deductions

Employees may agree to voluntary deductions from their wages, as permitted by law and employer policies. Common voluntary deductions include employee contributions towards health benefit plans, employee insurance premiums, social funds, and wage assignments (where allowed by law). Other deductions may be made with employee agreement.

4.8.1 Health Benefit Plans – Dental, Medical, Prescriptions

Employees may choose to have their employer make voluntary deductions from their pay to participate in health benefit plans for medical, dental, prescriptions, and other health coverage offered by their employer. Employees’ participation in these plans is voluntary, and employees may choose to opt out of coverage.

If an employee is participating in an employer health plan, payroll should make the applicable deductions.

4.8.2 Insurance

Insurance deductions may be made through payroll where permitted by employer policy and agreed to by employees. Life and/or health insurance are common insurance deductions. As with employee participation in health benefit plans, these deductions are voluntary.

4.8.3 Social Funds and Charitable Contributions

Employees may choose to contribute to social funds or make charitable contributions through voluntary payroll deductions. These deductions would be by agreement, where the employer agrees to make the deduction and remit the amount(s), and the employee agrees to contribute funds.

4.8.4 Wage Assignment (by Employee Agreement)

Assignment of wages—when an employee agrees to have the employer pay part or all of their wages directly towards a debt—is generally not permitted by law in Canada, but there are exceptions in different jurisdictions.

• Ontario allows employees to assign up to 20% of their wages to a credit union (Wages Act, s. 7(8)). Other assignments are not permitted.
• British Columbia allows employees to assign wages in specific situations, including credit obligations to the employer for advancement of wages, goods or services provided by the employer, or personal use of property provided by the employer (Government of British Columbia, n.d.).
• Yukon allows employees to assign wages in specific situations, including assignment to any creditor if the assignment is made in writing (Employment Standards Act, s. 64).
• Wage assignment to a lender is prohibited in Alberta; the law is silent about wage assignments to other individuals or organizations (Fair Trading Act, s. 53).

The exceptions (if any) to wage assignments vary significantly between jurisdictions in Canada, and payroll should check relevant legislation for the applicable jurisdiction before paying an employee’s salary to a third party.

It should be noted that wage assignments and wage garnishments are not the same—wage assignments are voluntary agreements that the employee can enter into when permitted by law, whereas wage garnishment is court ordered; see section 4.6 Court-Ordered Wage Garnishment for more details.

References

Employment Standards Act, RSY 2002, c. 72 (2023a). https://canlii.ca/t/560n1

Fair Trading Act, SA 1998, c. F-105. (2019). https://www.canlii.org/en/ab/laws/astat/sa-1998-c-f-1.05/latest/sa-1998-c-f-1.05.html

Government of British Columbia. (n.d.). Guide to the Employment Standards Act and Regulation. https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/forms-resources/igm

Wages Act, RSO 1990, c. W.1 (2022). https://www.canlii.org/en/on/laws/stat/rso-1990-c-w1/196598/rso-1990-c-w1.html