Payroll deductions are limited by law. Without the employee's consent, the employer may only withhold income tax and social security and health insurance contributions. Union dues require written authorization, revocable at any time. Fines are prohibited, except for those provided in the collective bargaining agreement, and no deduction may touch the inviolable portion of wages.
This page shows what is allowed to be kept, what is prohibited, how damage caused by the employee is handled, and what must be documented.
Read also: Payroll and Contributions: The Complete Guide
Article 117 of the Labor Code divides the issue into two short, concise points.
| Retention | Condition | Article |
|---|---|---|
| Payroll tax | Legal obligation, without consent | 117, point 1 |
| Social and health contributions | Legal obligation, without consent | 117, point 1 |
| Retentions provided for in the contract | When they arise from law, regulation, or contract. | 117, point 1 |
| Union dues | Only with written, revocable authorization. | 117, point 2 |
| The previously paid deposit | Deducted on payday | 116, point 3 |
Outside this list, any retention requires either a specific legal basis, a court order, or the employee's express written consent.
Read also: Payroll Tax and Current Rate Bands
The code deems certain practices that are still common on the ground to be invalid.
Notice: Delays, private phone calls, or damage to a device are not grounds for withholding pay. These are handled through disciplinary measures under the internal regulations, not by deductions from the payroll. Any unwarranted deduction must be fully restored, and an audit will treat it as illegal withholding.
Read also: Internal Regulations and Disciplinary Measures
This is the case where people are most often mistaken, because there really is a responsibility, but it is not fulfilled through deductions from pay.
Article 27 recognizes the employee's liability for damage caused intentionally or through negligence. The same article also sets clear limits. Damage that is inherently linked to the performance of the job is borne by the employer. The court may relieve the employee fully or partially when he has acted with slight negligence, when the employer has also erred in organizing and supervising the work, or when full compensation cannot be borne by his income.
Article 122, paragraph 2, allows the employer to offset wages with a claim against the employee, but only if the non-attachable wage is not affected. Excluded are obligations arising from intentionally caused damage, which are offset without limitation.
In practice, this means that a disputed damage claim is not unilaterally deducted from the monthly salary. It is either accepted in writing by the employee or pursued through the courts.
Article 123 places a limit on all deductions. Wages are considered inviolable to the extent necessary for the subsistence of the employee and his family.
The court sets the threshold on a case-by-case basis, taking into account expenses for food, rent, and clothing, as well as tax obligations and contributions. When the court is unable to assess all the elements, the exempt salary is equal to the national minimum wage.
Article 118, paragraph 1(1), requires the employer to provide the employee with a statement, before or immediately after payment, showing all elements of the pay, the allowances received, and the deductions made.
Article 119 provides for it. For each paycheck, a calculation is provided showing the amount, the bases for calculation when they vary, and all deductions from it. If the paycheck is not calculated on time, the employee has the right to request the information and, where appropriate, to consult the relevant documentation.
Payroll is disbursed only through the banking system, in accordance with Article 118, paragraph 1. This means that each deduction leaves a double trace, on the payslip and in the transfer. You can quickly see the breakdown of gross pay, deductions, and net amount. Pay calculator.
Read also: Invoice, contents, and payment terms
Article 116 requires payment every two weeks when the salary is calculated by the hour, day, or week, and at the end of each month when it is calculated by the month, unless otherwise agreed in writing.
Article 120 prescribes the consequence. For late payment, the annual interest rate shall be no less than 10 percent of the unpaid amount and in any event no less than 150 percent of the inflation during the period of delay.
This template has been prepared by AlProfit Consult for cases where the law requires written consent, such as union dues or an amount voluntarily accepted by the employee.
Authorization for Withholding from Pay
I, the undersigned, first name and last name, in my capacity as job position, at the company named [company name], NUI/S,
I authorize the employer to withhold from my monthly salary the amount in figures and in words LEK, for the purpose of describing the purpose, beginning in month month and year and ending in month month and year.
I declare that I am aware that this authorization is given voluntarily, that I may revoke it at any time by providing written notice to the employer, and that the revocation takes effect for the following month's payroll.
I also declare that this withholding neither replaces nor includes income tax and mandatory contributions.
Place and date
Employee's signature
Employer's signature
The authorization is kept in the employee's file, and the amount is shown separately on the pay stub.
Read also: Ready-made templates and forms for employment
Article 202(2) of the Code also includes Articles 116 and 119. Thus, irregular payment of wages and failure to provide the employee with a wage statement are punishable by a fine of up to 30 times the monthly minimum wage, that is, up to 1,500,000 LEK with a minimum wage of 50,000 LEK.
For Articles 117, 122, and 123, Article 202 does not provide for a direct fine. The consequence there is civil. The amount unlawfully withheld is returned in full, the relevant clause is void ab initio, and the limitation period for the claim is three years under Article 203.
Read also: Inspectorate Fines and How to Appeal Them
Every withholding also affects the declaration, because the basis for contributions remains the gross salary and not the net amount paid. This must be accurately reflected in the declaration. Monthly employee and payroll report.
Only income tax and social security and health insurance contributions, as well as withholdings expressly provided for by law, regulation, or contract, pursuant to Article 117, paragraph 1.
No. Article 122, paragraph 3, prohibits fines imposed by the employer, except for those provided for in the collective agreement. Delays are dealt with through disciplinary measures.
Not directly. Liability exists under Article 27, but compensation by salary is only allowed within the limits of Article 122 and without touching the inviolable salary. It must be accepted in writing or sought in court.
The portion of wages necessary for the employee and his family's livelihood. The court sets the threshold, and if it is unable to determine it, it is equated with the national minimum wage.
Yes. Sections 118(1)(1) and 119 require that the employee receive a statement showing all elements of pay, allowances, and deductions.
Yes. Article 116, paragraph 3, allows the deduction of advances on the day of payment, provided they remain within the limit of the impignorable wage.
The annual interest rate shall be no less than 10 percent of the outstanding amount and, in any event, no less than 150 percent of the period's inflation, pursuant to Article 120.
Within three years from the date the right arises, in accordance with Article 203 of the Labor Code.
