What are Voluntary Deductions on Payroll? A Must-Know Guide

Voluntary deductions in payroll can be confusing, but getting them wrong isn’t an option. If you offer benefits like workplace pensions, charity schemes, or staff perks, you’ll likely need to handle these deductions correctly. This quick guide breaks down what counts as voluntary, how they work, and what every employer needs to watch out for.

What Are Voluntary Deductions?

Voluntary deductions are payments an employee agrees to have taken from their wages for things like pension top-ups, charity donations, or staff benefit schemes.

This is why someone might voluntarily have money deducted from their paycheck.

They aren’t legally required, but if you offer them, you’re responsible for making sure they’re handled correctly.

That means getting written consent, recording them properly, and ensuring they don’t reduce pay below the minimum wage.

If you’re wondering what the 5 mandatory deductions from your paycheck are, they usually include Income Tax, National Insurance, student loan repayments, workplace pension contributions, and child maintenance (if applicable). These are set by law, not choice.

Common Examples of Voluntary Deductions

These are optional deductions your employee agrees to - often tied to workplace perks or benefits. Voluntary deductions examples include:

• Pension top-ups: Contributions above the legal minimum.

• Charity donations: Through payroll giving schemes.

• Private health or dental insurance: If you offer it as a benefit.

• Union or membership fees: For trade unions or professional bodies.

• Cycle to Work schemes: Paid through salary sacrifice.

• Repayments for staff loans: Like season tickets or salary advances.

What Employers Need to Know

• Get written consent before taking anything out of an employee’s pay.

• Never let deductions push pay below minimum wage (unless it’s for things like accommodation, and even then, check the rules).

• Show all deductions clearly on payslips so there are no surprises.

• Keep records - if HMRC asks, you need proof.

• Review agreements regularly, especially if benefits or job roles change.

What We Think

Voluntary deductions let you offer extra benefits to your team, but the rules around them can be confusing. We’ve seen many small business owners struggle with things like getting written consent, staying compliant with minimum wage laws, or even knowing which deductions are allowed.

We believe payroll should be simpler, especially for busy employers who just want to do the right thing. Until that happens, it’s important to have the right systems in place to avoid mistakes and keep everything running smoothly.

How JAFA Can Help

With JAFA’s app-based payroll solution, you don’t need to worry about missing a rule or juggling paperwork. Our platform simplifies everything:

• Voluntary deductions and staff pay are handled accurately, so you stay compliant with minimum wage rules.

• No messy spreadsheets - report wages and updates directly through the app, reducing errors.

• Employee consent and records stay organised - payslips, P45s, and P60s are auto-uploaded and easy to access.

We even handle staff payments on your behalf, which gives you peace of mind and more time to focus on your business.

Contact our expert accountants based in Birmingham, UK, either by booking a FREE discovery call or calling us on +44 121 227 6277.