Supreme Decree No. 5654 restricts the deductions that public sector entities may apply to the remuneration of their personnel. The measure enumerates the permitted categories and, in doing so, removes the discretion that entities had previously exercised in accommodating deductions requested by third parties.
The permitted categories
Deductions from public sector remuneration are now confined to those with an express legal foundation. In practice this means contributions to the social security and pension system; income tax and other withholdings required by tax law; deductions ordered by a competent judicial authority, including maintenance obligations; recovery of sums improperly paid by the entity itself; and deductions to which the individual public servant has expressly and voluntarily consented in documented form.
The category that will require the most attention is the last. Voluntary consent is not satisfied by institutional arrangement or by longstanding practice. It requires an individual, documented, revocable authorisation from the specific employee whose salary is affected.
The default has been inverted. A deduction is no longer permissible because no one has objected to it; it is permissible only because a rule allows it or the employee has agreed to it in writing.
Union dues and institutional arrangements
The most consequential practical effect concerns deductions historically applied on the basis of an arrangement between an entity and a third party — most commonly union dues, but also mutual associations, cooperative savings schemes, insurance products, and consumer credit facilitated through payroll.
Where such deductions have been applied on the strength of a collective arrangement rather than individual authorisation, they no longer satisfy the requirement. The entity's exposure is direct: an unauthorised deduction is a deduction the entity has made from remuneration it was obliged to pay in full.
What public entities should do now
The immediate task is an audit of the payroll deduction register. Each recurring deduction should be traced to its legal basis, and the basis identified: statutory, judicial, restitutionary, or consensual. Deductions in the consensual category require verification that a current, individual, documented authorisation exists for each affected employee.
Where authorisation is absent, the deduction should be suspended rather than continued while consent is sought. Continuing an unauthorised deduction during a remediation period does not cure it. Entities should also review the mechanism by which consent is captured going forward, and ensure that revocation is as administratively straightforward as authorisation — a consent that cannot practically be withdrawn is vulnerable to challenge.
Implications for third parties
Organisations that have relied on payroll deduction as a collection mechanism — unions, mutual associations, insurers, and lenders — should anticipate interruption and consider alternative collection arrangements. Contractual provisions that assume payroll deduction as the payment channel may require amendment, and receivables projections built on that assumption should be revisited.
How we can help
Our Labour & Employment and Administrative teams advise public entities on payroll compliance audits, consent documentation, and the remediation of historical deductions, and advise third parties on restructuring collection arrangements affected by the decree.
