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The Indiana Wage Payment and Collection Act seems like it should be rather simple, but it’s perhaps the most complicated employment law in the state. Full of traps for the unwary, the law can spell big trouble for even innocent mistakes.

The law covers all Indiana private employers, even those with only one employee, and requires employers to pay their employees biweekly. (Employers may pay more often if they wish.) The law allows you to pay in cash, check, money order, draft or through electronic transfer.

Employers that fail to pay employees within 10 days of the date due can incur a penalty of $1 per day plus employees’ attorneys’ fees, up to twice the amount of the original amount in dispute.

Upon termination, you must pay an employee all wages due within 10 business days of the last day of work or the next normal biweekly payday, whichever comes first. You may hold payment without penalty if an employee hasn’t provided you with an address to mail the check or appropriate banking information for direct deposit of the paycheck.

Penalties for failing to pay former employees are stiffer than those for late paychecks to current employees. Employers may be assessed 10% per day, up to double the original amount plus attorneys’ fees.

Payroll deductions

You can make deductions from employees’ wages only under certain conditions and with their written permission. Employees have the right to revoke a deduction at any time by providing written notice to the employer. The employer must agree to make the deduction in writing.

Under Indiana law, employers can make payroll deductions for:

  • Premiums on an employee’s insurance policy obtained by the employer.
  • Pledges or contributions by the employee to a charitable or nonprofit organization.
  • Purchase of bonds or securities, issued or guaranteed by the United States, as well as mutual funds.
  • Purchase of shares of stock, or fractional shares, in the company, or of a company owning the majority of the issued and outstanding stock of the employing company, whether purchased from the company, in the open market or otherwise. However, if the shares are to be purchased on installments pursuant to a written purchase agreement, the employee has the right at any time to cancel the agreement and to have repaid promptly the amount of all installment payments made to that point.
  • Union dues.
  • Purchase of company merchandise, at the employee’s written request.
  • Repayment of an employee loan, provided the employer maintains an executed promissory note authorizing the deduction signed by the employee.
  • Premiums on health insurance, employee-purchased life insurance policies or annuities.
  • Payments to a credit union, nonprofit organization or employee association.
  • Payments to any person or organization regulated under the Uniform Consumer Credit Code (IC 24-4.5) for deposit or credit to the employee’s account by electronic transfer or as otherwise designated by the employee.
  • Payments of certain judgments owed by the employee.

In cases of overpayments, employers may deduct the overage from an employee’s pay as long as the person is given two weeks’ notice. 

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