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Health Insurance Premiums

I am an employer and I have an employee that is being terminated that has health insurance coverage through our company. The health insurance premiums that we charge the employee are collected in arrears. The employee will receive two more paychecks. What the employee owes for health insurance premiums exceeds his final pay. Can I as the employer, modify his next to last paycheck for the additional amount he owes on his health insurance premiums? Or will I have to absorb the additional premiums since it exceeds his final paycheck amount?

Permissible deductions from an employee’s paycheck are regulated by both federal and state law. Generally, deductions that benefit employees such as health care premiums are permitted with the employee’s consent.

Some may argue that the additional deduction is part of the original agreement with the employee to deduct the necessary premiums from his paycheck. The other side is that the deduction is not in line with the normal course of deductions. Thus, a separate consent for the additional deduction is needed.

Unfortunately, the federal Fair Labor Standards Act (FLSA) doesn’t specifically address this issue. Some states have their own wage deductions laws but few will address this matter specifically either. Still, it’s best to know if any applicable state law exists.

Basically, it comes down to best practice. It’s advisable to obtain written consent from the employee to deduct the additional premium amount from the second to last paycheck. The employee should agree to this since doing so is in his best interest as well.

In the future, consider adding a sentence to the initial deduction agreement that additional deductions may be necessary upon separation of employment since premiums are collected in arrears.


This entry was posted on Thursday, August 18th, 2016 at 1:18 pm and is filed under
Benefits, Compensation.
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