There must also be written documentation of their agreement which will serve as evidence that the workers have given their consent to the management to deduct a particular amount from their paychecks. We refer to this document as a payroll deduction form or payroll deduction authorization form. Learn more about it as we walk you through the basics of this document.

57+ Sample Payroll Deduction Forms

What Is a Payroll Deduction Form?

It is not true to all employees that they receive the same amount of compensation for the duties and responsibilities they carried out. There are several factors that may increase or decrease their pay. In most cases, employers give pay raises to their employees such as incentives, bonuses, night shift differentials, overtime pay, and commissions. However, there may also be deductions incurred for taxes, insurance contributions, absences, late, and undertime operations. Regardless of the cause of an employee’s salary deduction, they must be well aware of the total amount of money that will be taken from their pay. A payroll deduction form is an HR document that helps employers communicate with their staff the type of deduction and its sum. It may also serve as an agreement between the management and the employee/s that there will be deductions to their regular wages due to various factors.


Types of Payroll Withholdings and Deductions

Employers need to do calculations before issuing a payslip to their employees. The computation starts with the gross pay and ends with the net pay. Gross pay is the sum of money the employees have before various payroll deductions. On the other hand, net pay is the total amount the workers will have on their hands during payday. It sounds like an easy process at first glance. However, the management needs to have strong attention to detail so as not to commit mathematical errors. The complexity of calculating the payroll can be bearable if you have a better understanding of the factors which you need to consider during the process. In this section, we will cover the common types of payroll withholdings and deductions that you and your employees may come across. It is important to have a background knowledge of these things so you can help the employees understand why they receive a lower compensation than what they expected.

Federal Income Tax: In the United States, the government’s revenue is mostly composed of the federal income tax. It is the tax levied on the annual earnings of individuals, corporations, or other entities that reside or operate in a specific city, state, or country. The rate of this mandatory payroll deduction is the same across all states. However, the amount of money taken from the employees’ paycheck depends on what they stated on their form W-4. In this form, the employees should specify the amount of tax to withhold from their paycheck. If they prefer to pay a small amount, they will have higher net pay. Consequently, these employees will pay a higher sum of taxes by the end of the year.State Income Tax: Just like the federal income tax, the money collected from the state income tax goes to the state’s government. The amount of tax deducted from the employees’ gross pay varies from state to state—depending on where the company or business operates. However, there are nine states with no income tax. These are Alaska, Nevada, Florida, South Dakota, Tennessee, New Hampshire, Texas, Wyoming, and Washington.Social Security Tax: Unlike other types of payroll deductions where the tax is levied on the employees alone, paying the social security tax is the responsibility of both the employee and the employer. The Federal Insurance Contributions Act (FICA) mandates the management and the staff to contribute to the Social Security program. Currently, the Social Security tax rate for both the employee and employer is 6.2%, for a total of 12.4%.Medicare Tax: Medicare tax is another component of the Federal Insurance Contributions Act (FICA) tax. This type of payroll tax is similar to the social security tax wherein the employee and employer make equal contributions. It deducts 1.45% of an employee’s wage and the employer will contribute a matching amount. As the name suggests, Medicare taxes serve as the financial source of Medicare coverage. This health insurance program covers specific services for the medical treatment for retirees and people with disabilities.Health Insurance: Data from the United States’ Bureau of Labor Statistics showed that as of 2017, 67% of employees in the private sector had access to medical care benefits provided by their employees. Offering a health insurance plan to the employees such as medical, dental, or vision health premium/s is an example of a medical care benefit. Since it is a voluntary payroll deduction, it is up to the employees whether or not they will participate in the offered benefit.Retirement Plan: No matter how efficient we are in the workplace at this moment, there is no guarantee that we can work as effectively as we are as the years go by. Time will come that our age and health will not permit us to report to work. For this reason, having a retirement plan is essential. It helps the workers save up so they will have money to use as they reach a particular age. If an employee avails of a retirement plan, the employers will deduct a particular amount in their wages. Various types of retirement plans include Individual Retirement Arrangements (IRAs), Roth IRA, 401(k) plans, 403(b) plans, and others.Uniform: The federal law allows employers to deduct a reasonable amount on the employee’s paycheck for the cost of the uniform. However, their wages must not hit below the required minimum wage after the deduction. Aside from the federal law, though, you must also check the state laws regarding payroll deductions for uniforms. If you are an employer, you must note that some state laws give the obligation of paying for the employees’ uniforms to the employers. This means that the company’s staff are not required to pay for their uniform’s expenses.

How to Create a Payroll Deduction Form

When you set up a payroll deduction program for your employees, a payroll deduction form is a must-have. Through this document, the employees may grant you the authority to execute various deductions on their payroll. Creating a payroll deduction authorization form adds up to the pile of paperwork you need to do. We will help you with the process. Provided below is a step-by-step guide on how to create a payroll deduction form for your company.

Step 1: Acquaint Yourself with the Federal and State Laws

Before establishing a company, it is essential to know the laws in your country, city, or state. If your business or company is operating in the United States, you should note that there are state laws in relation to employment that you need to abide by aside from the federal laws implemented. Moreover, it is important to do thorough research about payroll deductions before setting it up for your employees. You should also have a clear understanding of the things that are considered as legal payroll deductions so as not to put your company at stake.

Step 2: Begin with the Employee’s Information

Now that you are familiar with the laws, you may start creating the form. The first section of your payroll deduction form should help you gather relevant information about your employees. This includes their complete name, employee number, social security number, home address, job title, and department. Remember to insert a blank space after each item for the employees to fill the document later on.

Step 3: Specify the Payroll Deduction

As discussed in this article, there are various types of payroll withholdings and deductions ranging from taxes to benefits. Therefore, it is essential to specify the type of payroll deduction implemented. Create a table with three columns and several rows. Then, write the following at the topmost cells: Type of Deduction or Benefit Type, Amount to be Deducted, and Deduction Amount per Pay. You have to leave this section blank since you still have to inform the employees of the payroll deduction program. In addition to that, it is up to the employees if they will take part in the offered benefit (for voluntary payroll deductions.)

Step 4: Write an Authorization Statement

Your payroll deduction form will serve as evidence that the employees agreed to have their wages or compensation deducted for various purposes. Thus, it should have a record of the agreed-upon terms between the employer and the employee regarding the deductions to be executed at a specific time. Just below the table, compose a statement that will authorize you to incur deductions on the employee’s paycheck. However, you should bear in mind that this will only take full effect when the employees sign the document.

Step 5: Discuss with the Employees

Lastly, provide a signature line for the employees at the bottommost portion of the document. After proofreading your payroll deduction authorization form and printing out the document, you need to discuss the payroll deduction arrangements to the employees concerned. Before the workers sign the document, see to it that they have a full understanding of the deductions incurred in their paychecks during payday. Doing so will avoid misunderstandings in the future. If you need a reference document or a template to help you create a payroll deduction authorization form in an instant, see the sample documents compiled above.

Dos and Don’ts of Payroll Deductions

Withholding amounts from your employees’ payroll check can be confusing if you don’t have a clear idea about the rules of payroll deductions. Now that you know the fundamentals of payroll deductions, let us look into the dos and don’ts of the subject matter. Knowing the dos and don’ts of payroll deductions will keep costly errors, lawsuits, and penalties at bay.


1. Do know the allowable payroll deductions.

Employers are not free to withhold or deduct any amount of cash on their employees’ paychecks. There are rules and regulations specifying what is considered as an allowable payroll deduction and under what circumstances can the management make deductions on their worker’s wage or salary. Typically, employers can only deduct a certain amount from their employees’ paycheck if it is mandated by the legislation or if the employees agree to it. As an employer, you should know the rules of allowable payroll deductions to keep the good reputation of your company and to avoid disputes.

2. Do classify your employees.

Employees who belong to a particular company have varied roles and responsibilities to handle—depending on what is reflected in the company’s organizational chart. The rank or position of each employee determines their salary grade. With this in mind, you should properly classify your employees for you to figure out whether or not you will withhold income taxes from your employees’ paychecks.

3. Do create a payroll schedule.

If you are an employer or a human resource staff, you should know the significance of creating a payroll schedule as part of your payroll planning. According to the Bureau of Labor Statistics, about 36% of private businesses in the United States pay their employees once every two weeks. On the other hand, other companies pay their workers on a weekly, semi-monthly, or monthly basis. Having a payroll schedule will help you convey to the employees how often will there be deductions on their wages. Aside from that, it also enables you to handle your responsibility of depositing federal payroll taxes according to the requirements set by the Internal Revenue Service (IRS).


1. Don’t miscalculate.

Calculating your employee’s net pay can be a challenging task, especially when your company has a long list of employees. Nevertheless, you should see to it that your calculations in relation to the payroll deductions are accurate and error-free.

2. Don’t forget the state laws.

As previously mentioned, you need to familiarize yourself with both federal laws and state laws. While federal law applies across the country, you should bear in mind that there are also laws that only take effect within a particular state. Therefore, it is a must that you have fully understood the laws which you need to comply with. Note that there are different types of payroll deductions that are permitted and prohibited in each state.

3. Don’t forget your obligations as an employer.

Aside from the deductions incurred on the wages of your employees, there are also federal and state taxes which requires you to contribute the equal amount your employees pay. You should keep in mind that it is your part of your obligation as an employer to pay a portion of the Social Security tax and the Medicare tax.