Indiana: Employee Wage Deduction Requirements

Requirements one by one

Any employee-directed deduction is a "wage assignment"

Indiana routes almost every voluntary payroll deduction through one concept.
Section 22-2-6-1 says that any direction an employee gives the employer "to make a
deduction from the wages to be earned" is an "assignment of the wages." That
matters because a wage assignment is valid only if it clears the requirements in
the next section. So the question in Indiana is rarely "did the employee agree?", it is "does this meet the wage-assignment rules?"

The six conditions for a valid assignment

Under § 22-2-6-2(a), an assignment is valid "only if all of the following
conditions are satisfied." In practice that is six things:

• It is in writing.
• It is signed by the employee personally.
• It is revocable at any time by the employee on written notice.
• It is agreed to in writing by the employer.
• An executed copy is delivered to the employer within 10 days.
• It is made for a purpose described in subsection (b), the enumerated list.

Miss any one and the assignment is not valid. A signature on a handbook, or an
agreement for a purpose that is not on the list, does not satisfy the statute.

The enumerated purposes are a closed list

Subsection (b) sets out the purposes a wage assignment "may be made for", a
fixed catalog that includes employer-obtained insurance premiums, charitable
pledges, U.S. savings bonds, employer stock, union dues, employer-sold
merchandise or food at the employee's written request, employer loans, hospital,
medical, and pension-plan contributions, credit unions, direct deposit, life
insurance and annuities, mutual funds, agreed judgments, uniforms, tools, education
reimbursement, payroll and vacation advances, and drug-treatment services. If a
proposed deduction does not fit one of these purposes, no signature makes it
lawful.

What is missing from the list: losses

The list contains no entry for cash or inventory shortages, breakage, damage,
theft, or other employer losses. Because a deduction is valid only for an
enumerated purpose, an employer generally cannot assign an employee's wages to
cover those. Two work-related categories are allowed but tightly limited:
uniforms and job-related clothing (§ 22-2-6-2(b)(14)) and necessary equipment or
tools ((b)(15)). Even then, the charge cannot exceed the employer's direct cost
from an outside vendor, the total is capped at the lesser of $2,500 per year or 5%
of weekly disposable earnings (§ 22-2-6-2(d)), and federally required protective
equipment cannot be charged at all (§ 22-2-6-2(e)).

Overpayments run on a separate track

Recovering an overpayment is not a wage assignment and not a "fine"
(§ 22-2-6-4(a)). An employer may deduct an overpayment, but must give two weeks'
notice, cannot deduct an amount the employee disputes under IC 22-2-9-3, and is
capped each week at the lesser of 25% of disposable earnings or the amount over 30
times the federal minimum wage (§ 22-2-6-4(c)). The one fast track is a decimal
error: a single overpayment equal to 10 times the employee's gross wages may be
recovered immediately.

What trips people up

The biggest trap is assuming a signed form is enough. It is not. The purpose must
appear on the § 22-2-6-2(b) list, and the assignment must also be revocable,
employer-agreed in writing, and copied to the employer within 10 days. A deduction
that is missing any piece, most often a purpose that is simply not listed, is
invalid despite the signature.

Loss deductions are the common casualty. Because shortages, damage, and theft are
absent from the list, docking pay for a cash drawer that came up short, or for a
broken piece of equipment, falls outside the statute. An employer's route for a
genuine claim is to pursue the employee, not to self-help through payroll.

Uniform and tool deductions look permitted but are boxed in. They are limited to
the employer's actual outside-vendor cost, jointly capped at $2,500 a year or 5%
of disposable earnings, and can never include OSHA-required protective gear.

Common questions

Can my Indiana employer deduct for a register shortage or damaged equipment?

Generally no. Wage assignments are valid only for the purposes listed in
§ 22-2-6-2(b), and shortages, breakage, damage, and theft are not on that list.
An employer that docks pay for those is acting outside the statute even if you
signed something.

My employer says it overpaid me. Can it just take it back?

Only within limits. Under § 22-2-6-4 it must give you two weeks' notice, cannot
deduct an amount you dispute, and cannot take more per week than 25% of your
disposable earnings (or the amount over 30 times the federal minimum wage). A
large overpayment caused by a misplaced decimal is the exception and can be
recovered at once.

Can I cancel a payroll deduction I agreed to?

Yes. Every valid wage assignment must, by its terms, be "revocable at any time by
the employee upon written notice to the employer" (§ 22-2-6-2(a)(1)(C)). Put the
revocation in writing to the employer.

What can I recover if my employer took an unlawful deduction?

An unlawful deduction leaves wages unpaid. Under § 22-2-5-2 you can recover the
unpaid wages, and the court must award your reasonable attorney's fee and costs.
If the court finds the employer was not acting in good faith, it adds liquidated
damages of two times the wages due.

Statutes and sources

• Ind. Code § 22-2-6-1. Defines any employee-directed deduction as a wage
  "assignment" and includes public employers. Official 2026 code (ch. 22-2-6)
  (accessed July 13, 2026).
• Ind. Code § 22-2-6-2. The assignment requisites (writing, personal
  signature, revocability, employer agreement, 10-day delivery), the enumerated
  permitted purposes, the loan interest cap, the uniform/tool dollar cap, and the
  protective-equipment carve-out. Official 2026 code (ch. 22-2-6)
  (accessed July 13, 2026).
• Ind. Code § 22-2-6-4. Overpayment recovery: two weeks' notice, no disputed
  amounts, and the 25%/30x-minimum-wage weekly cap, with a decimal-error
  exception. Official 2026 code (ch. 22-2-6)
  (accessed July 13, 2026).
• Ind. Code § 22-2-5-2. Wage Payment Statute remedy: unpaid wages, mandatory
  attorney's fee and costs, and double liquidated damages where the employer did
  not act in good faith. Official 2026 code (ch. 22-2-5)
  (accessed July 13, 2026).