Indiana law permits employers to make deductions from an employee's pay to repay a loan made by the employer to the employee. The amount of the loan must be shown in a written document signed by the employee and the employer (IN Code Sec. 22-2-6-2). The amount of a wage deduction to repay an employer loan may not exceed the lessor of 25 percent of the employee's disposable earnings for that week or the amount by which the employee's disposable earnings for that week exceed 30 times the federal minimum hourly wage in effect at the time the earnings are payable. For a pay period other than a week, the earnings must be computed using a multiple equivalent to 30 times the federal minimum hourly wage (IN Code Sec. 22-2-6-4).
Authorization. An authorization signed by the employee that includes a clear statement of the amount and term of the loan and the amount of the deduction should be obtained from the employee. The amount of the deduction should also be included on the statement of deductions provided with each paycheck.
Last reviewed on May 10, 2016.