Loans, advances and deductions from a domestic worker's pay: what is allowed

Sooner or later your domestic worker asks for an advance on the month's wage, or a loan for school fees or a funeral. Or a plate breaks and you wonder whether the cost comes off the pay. The rule is stricter than most employers expect: you may not simply deduct.

The starting point: no deductions without a basis

Section 34 of the Basic Conditions of Employment Act (BCEA) begins from a prohibition. In plain terms, a deduction is lawful when:

• It is required by law, such as the UIF contribution of 1% of the wage (and PAYE where it applies).
• It is authorised by a court order or similar legal instrument.
• Your employee agreed in writing to it, for a debt that the agreement names (a loan or an advance fits here).

Anything else, including a deduction made "to teach a lesson", is a risk. A High Court ruling in June 2026 repeated that an employer may not resort to self-help by taking money off pay without consent or another lawful basis.

Advances and loans

• Put it in writing: the amount, the date, and how much comes off each month. Both of you sign and each keeps a copy.
• Keep the repayment small enough that the wage still covers the employee's needs. A repayment that leaves nothing is an invitation to a dispute.
• Show the repayment as a line on the payslip so both sides can see the balance fall.
• Never deduct a loan from the minimum wage floor without agreement: the wage you owe is still the wage you owe.

When something is lost or broken

A deduction to recover loss or damage is the most disputed kind. Even with written consent, the commentary on section 34 sets out these conditions:

• The loss happened in the course of employment and was the employee's fault.
• You followed a fair procedure and gave your employee a reasonable chance to say why the deduction should not be made.
• The amount is no more than the actual loss.
• The deduction is no more than 25% of the employee's pay in money.

Is an interest-free loan taxable?

Possibly, though rarely for a domestic worker. SARS treats a cheap or interest-free loan from an employer as a fringe benefit: the gap between SARS's official interest rate and the interest actually charged is added to the employee's taxable income. The calculator below shows the official rate and the extra tax. Loans of R3,000 or less are not taxed this way.

Worked example: you lend R10,000 interest-free to an employee earning R6,000 a month (R72,000 a year). The benefit is R10,000 x the official rate for the year, and the calculator shows whether it creates any extra tax at that income.

Calculator by CalcSA - open the employee loan calculator if it does not load.

At that income the extra tax is nil or close to it, which is why most household loans are a record-keeping matter, not a tax one. Larger loans to a higher-earning employee are different, so run the numbers.

What to do as the employer

• Agree every advance, loan or deduction in writing, before the money comes off.
• Keep it simple: one loan at a time, a fixed monthly repayment, a clear end date.
• For breakages, talk first. Do not deduct without a conversation and a written agreement.
• On final pay, do not sweep an unpaid balance off the last wage unless the written agreement covers it.
• Keep the agreements with your payslip records; the Act expects you to keep records for three years.

Common mistakes

• Deducting for breakages with no agreement or conversation.
• Verbal advances that neither side remembers the same way.
• Letting repayments eat the whole wage, so the employee takes another advance next month.
• Deducting more than 25% of the pay in one month.

General information, not legal advice. Every figure we use is on the rates page with its source.