Direct Earnings Attachments

An Employer's Guide

What this booklet is about

This page explains what you, as an employer, need to do if we ask you to implement a Direct Earnings Attachment, (DEA).  You will find guidance on the following:

• how to operate and make payments for a DEA, and
• what your legal responsibilities are.

This booklet is intended to help you understand the main points about DEAs.  It is not a full description or statement of the law. 

Please read first - Important Information

On 4 March 2013 the Social Security (Overpayment and Recovery) Regulations 2013 were laid before Parliament effectively allowing the Department for Work and Pensions (DWP) and Local Authorities (LA's) to introduce Direct Earnings Attachments (DEAs) to recover money owed. These regulations became statute on 8 April 2013.

If you are using a computerised payroll system and you receive a request to set up a DEA you will need to:

1. Manually calculate the amount to deduct from earnings - please view how to do this in the section 'How do I calculate the amount to deduct?' 
2. Manually check whether there are any other orders currently in place - as the DEA may take priority over these - please view a full list of the orders and how they may impact on a DEA in the section 'Employee has other Court Orders against them'
3. In cases where the DEA does take priority over another order, consider whether other orders need to cease or deduction amounts be recalculated
4. Ensure, in cases where other orders cannot be applied, that these are removed manually from the payroll system and subsequently re-instated once a DEA ceases.

Please contact us by telephone on 01772 906610,or by emailing controlteam@preston.gov.uk if you require any further information or help in operating a DEA.

Further information regarding DEAs and how to operate them can be found on the DWP website, or a more detailed DWP guide can be downloaded at GOV.UK - Direct Earnings Attachment: an employers' guide.

Introduction to Direct Earnings Attachments (DEAs)

The Department for Work and Pensions (DWP) and Local Authorities (LA's) are responsible for recovering money owed to the State as a result of debt arising under the Social Security Administration Act 1992.

Where the Secretary of State or authority administering Housing Benefit has been unable to recover money owed to the LA by customers not currently in receipt of benefit, that money may now be recovered by deduction from the customer's earnings.

The Welfare Reform Act 2012, which became law in March 2012, allows DWP Debt Management and Local Authorities to ask you, as an employer, to make deductions directly from a customer's earnings. We do this by asking you to operate a Direct Earnings Attachment (DEA). 

We do not have to go through the civil courts to do this, unlike the Attachment of Earnings Order (AOE) process, for example, within the Welfare Reform Act, the legislation covering DEAs, part of the Social Security (Overpayment and Recovery) Regulations 2013, come into force on 8 April 2013.

A DEA has its own regulations which follow some of the workings of a Deduction from Earnings Order (DEO) and some workings of an Attachment of Earnings Order (AEO). A DEA does not replace any of these other orders and in some circumstances employers may receive requests to implement deductions for a DEO and a DEA for the same employee.

You may be familiar with a DEO if you have ever been ordered to make deductions from an employee's earnings or pension for the Child Maintenance Group (CMG) (previously known as the Child Maintenance and Enforcement Group (CMEC), or the Child Support Agency (CSA)), as a way of collecting child maintenance from a non-resident parent.

Your Responsibilities

As an employer, you have a legal obligation to:

Implement a Direct Earnings Attachment when we ask you to by making deductions from the employee's net earnings, i.e. after deduction of:

• income tax
• class 1 contributions
• amounts deductible by way of contributions to a work place pension scheme which provides payment of annuities or lump sums
• to the employee on retirement at a specified age or on becoming incapacitated at an earlier age
• on the employee's death, to the personal representative, widow, surviving civil partner, relatives or dependants
• make payments to us by the 19th day of the month following the month the deduction is made
• keep a record of each deduction taken, and the employee from whose earnings it was made
• continue to operate the DEA until the Local Authority advises you to stop or your employee leaves.

If you fail to comply, you may be subject, on conviction, to a fine of up to £1,000.

Providing Information

To the Local Authority - you have a duty to notify us if:

• we ask you to operate a DEA for someone who does not work for you,
• an employee for whom you are operating a DEA leaves your employment.
• you are a new business (which starts between 8 April 2013, and 31 March 2014), or a micro business (having fewer than 10 employees), as defined in the Regulations.  If you are a new or micro business, you are not obliged to operate a DEA although you may do so if this is agreed with your employee. 

You must write to us at the address shown on the DEA request letter within 10 days if any of the above applies to you.

To your employee - you have a duty to:

• notify your employee in writing of:
• the amount of the deduction taken, including any amount taken for administrative costs and how the amount was calculated (see section on Administrative Costs). If this information is shown on the payslip, it will suffice. 

You must do this (and record it) no later than the payday after the one on which the deduction for the DEA was taken.

You should also let us know:

• if your business ceases trading.

The definition of earnings for DEAs

The table below lists what counts and what does not count as earnings.

What counts as "earnings" for DEAs

• Wages
• Salary
• Fees
• Bonuses
• Commission
• Overtime pay
• Most other payments on top of wages
• Occupational Pensions (if paid with wages or salary)
• Compensation payments
• Statutory Sick Pay
• Payments in lieu of notice

What does not count as "earnings" for DEAs

• Statutory Maternity Pay
• Statutory Adoption Pay
• Ordinary Statutory Paternity Pay
• Additional Statutory Paternity Pay
• Any pension, benefit, allowance or credit paid by DWP, a Local Authority or HMRC, including pensions, benefits or allowances payable in respect of disablement or disability, and working tax credit. 
• A guaranteed minimum pension under the Pensions Scheme Act 1993 (b)
• Amounts paid by a public department of the Government of Northern Ireland or anywhere outside the United Kingdom
• Sums paid to reimburse expenses wholly and necessarily incurred in the course of the employment
• Pay or allowances as a member of Her Majesty's Forces, other than pay or allowances payable to them by you as a special member of a reserve force. Payments as a member of the reserved forces count as earnings, even if that is the debtor's only source of income.
• Redundancy payments and pay in lieu of notice

If the only earnings your employee receives are those in the right hand column, you cannot calculate a DEA deduction; similarly, if any of these are paid as part of the earnings, they are not to be included as part of the employee's net earnings.

You must continue to calculate a DEA deduction, if applicable, each pay period until either we tell you to stop or your employee leaves your employment.

Net Earnings

You must take the amount for the Direct Earnings Attachment directly from your employee's net earnings. (Net earnings are the amounts the employee earns after taking off income tax, National Insurance and contributions to a pension, including Additional Voluntary Contributions, Free Standing Additional Voluntary Contributions and Stakeholder Pension Contributions).

How does a DEA operate?

We will send you a letter (notice) which tells you to implement a DEA for your employee. The notice will include a payment schedule and advises you:

• where to send us payments
• how you can pay us

We will include the invoice number of our customer on all our letters we send to you.

We will ask you to make payments in line with your payroll, so if your employee is paid weekly or monthly, you should pay us at the same time. However, if your employee is paid weekly you must still calculate and deduct the payment weekly, but you can pay us monthly if you prefer.

It is your responsibility to ensure you take the right amount from your employee's earnings each week or month and pay it to us.

When you calculate the DEA deduction amount, you must:

• ensure that your employee has enough net earnings in the pay period for you to calculate a deduction
• check that the correct percentage rate has been applied against those net earnings
• check that the total of all deductions does not leave the employee with less than the protected earnings proportion, which is 60% of their total net earnings during the calculating period to which the deduction relates.

If there is already a Direct Earnings Order in place from CMG, or other priority orders are in place, please refer to the examples on the following pages. If you wish to discuss this with us or if you receive a request from CMG after we have asked you to implement a deduction, and you have any questions, please telephone us on 01772 906610.

How do I calculate the amount to deduct?

• Work out the employee's net earnings as defined previously
• use table A/B to find the deduction percentage rate for the employee's net earnings
• use the percentage figure against the net earnings figure to calculate the amount to be deducted.

Table of amounts to be deducted by employer

Table A - Regulation 20 (3) 99 Schedule 2

With effect from 6 April 2015, there has been legislation changes and in accordance with Regulation 20 (3A) (3B), this allows for a higher rate of recovery via a DEA. 

The letter we send to you will advise you of the relevant deduction table that is applicable for you to use.

Table B - Regulation 20 (3A) (3B) - 99 Schedule 2 

If an employee is paid 2 weekly, the total net wage is divided by 2 and table A/B is used to check the percentage rate.

If an employee is paid 4 weekly, the total net wage is divided by 4 and table A/B is used to check the percentage rate.

Holiday Pay

If an employee is paid a wage which includes holiday pay paid in advance, the net wage is averaged, and the percentage rate applied to the average figure, as follows:

Employee receives one week's wage and 2 weeks holiday pay. Total net payment for 3 weeks = £850.

£850 / 3 = £283.33

£283.33 x 11% from table A = £31.17 (N.B. you would apply 22% deductions if using table B).

Total deduction from net wage of £850 = £93.51 (£31.17 x 3)

Rounding

The exact amount of the net wage is used against table A/B. If the percentage amount calculated results in a fraction of a penny, it is rounded to the nearest whole penny, with a result of exactly half a penny being rounded down to the nearest whole penny below, as follows:

Net wage £235.63 per week

£235.63 x 7% from table A = £16.4941 (N.B. you would apply 14% deductions if using table B).

Weekly deduction = £16.49

Net wage £1547.99 per month

£1547.99 x 11% from table A = £170.278 (N.B. you would apply 22% deductions if using table B).

Monthly deduction = £170.28

Administrative costs

For each pay period where a calculation results in a DEA deduction, you may take up to £1.00* from your employee's earnings towards your administrative costs. This charge is to cover your costs so do not send this administration cost deduction to DWP Debt Management. You can take this charge even if it reduces the employee's income below the 60% protected earnings amount.

* Where you decide to apply an administration charge of £1.00, this deduction may bring the employees pay below the National Minimum Wage. Employers should check https://www.gov.uk/national-minimum wage/employers-and-the-minimum-wage, or contact the ACAS helpline for advice.

It is a criminal offence for employers to not pay someone the National Minimum Wage or National Living Wage.

Please note that the administration charge of £1.00 is only applied when a DEA deduction is actually made, and cannot be deducted for any pay period when no DEA deduction is made.

Failure to take deductions or incorrect deductions made

If you fail to take a deduction from the employee's net earnings when it is appropriate to make a deduction or take an incorrect amount you should correct this on the next payday or paydays.

Where the incorrect amount is because the deduction was less than the amount specified under the regulations then you should first:

• deduct the amount required for the current pay period.
• then include the difference between the incorrect and correct amount.

Please note that the total to be deducted, including adjustments for an incorrect deduction, along with other deductions in place, must not leave the employee with less than the protected earnings limit of 60% for each pay period.

Where the incorrect amount is because the deduction was more than the amount specified under the regulations then you should first:

• deduct the amount required for the current pay period.
• then reduce the deductions amount by the excess previously taken.

It is important to note that if a deduction is reduced in any week or month simply because the DEA along with other orders in place will breach the protected earnings limit of 60%, (example 3 refers), this is not a shortfall as described above.

A shortfall only occurs when an incorrect amount has been deducted in error, or when one or more deductions have been missed.

Examples of Direct Earnings Attachment in practice (Table A)

Example 1

A weekly paid earner with no prior attachment orders.

A person with net earnings of £385 per week will have a deduction of £57.75 per week (in accordance with the deduction rates table at 15%).

Example 2

A weekly paid earner that already has an existing attachment order for child maintenance deductions.

A person with net earnings of £250 per week with an existing attachment order of £60 per week for child maintenance will have a deduction of £17.50 (in accordance with the deduction table at 7%).

Example 3

A monthly paid earner with existing priority attachment orders totalling £486.

A person with net earnings of £1620 per month should have a DEA deduction of £243 (in accordance with the deduction table at 15%). However, this deduction in addition to the existing deductions of £486 will breach the protected earnings limit of 60%. The maximum deduction we can make in this instance would be £162.

Calculation

• Earnings x 40% = £648 (maximum amount for total deductions)
• Existing priority attachment order in place = £486
• 15% DEA deduction is = £243
• £648 - £486 = £162 (maximum amount available for the DEA deduction)
• Therefore, although the deduction rate table states that a deduction of £243 should be taken, the protected earnings limit means that the amount will be restricted to £162.

Examples of Direct Earnings Attachment in practice (Table B)

Example 1

A weekly paid earner with no prior attachment orders.

A person with net earnings of £385 per week will have a deduction of £115.50 per week (in accordance with the deduction rates table at 30%).

Example 2

A weekly paid earner that already has an existing attachment order for child maintenance deductions.

A person with net earnings of £250 per week with an existing attachment order of £60 per week for child maintenance will have a deduction of £35.00 (in accordance with the deduction table at 14%).

Example 3

A monthly paid earner with existing priority attachment orders totalling £486.

A person with net earnings of £1620 per month should have a DEA deduction of £486 (in accordance with the deduction table at 30%). However, this deduction in addition to the existing deductions of £486 will breach the protected earnings limit of 60%. The maximum deduction we can make in this instance would be £162.

Calculation

• Earnings x 40% = £648 (maximum amount for total deductions)
• Existing priority attachment order in place = £486
• 30% DEA deduction is = £486
• £648 - £486 = £162 (maximum amount available for the DEA deduction)

Therefore, although the deduction rates table states that a deduction of £486 should be taken, the protected earnings limit means that the amount will be restricted to £162.

What if my employee does not earn enough for me to make the deduction?

If the weekly or monthly earnings are below the threshold (see table A/B) you cannot calculate a DEA deduction.

You must continue to calculate a DEA deduction, if applicable, each pay period until either we tell you to stop or your employee leaves your employment.

Making payments to Preston City Council

On receipt of a notice to operate a DEA, you must:

• make regular payments until you calculate the balance is cleared
• or make regular payments to us until informed by us to stop
• pay the amount you take from your employee's wages to the Council as soon as possible, but no later than the 19 day of the month following the month in which you have taken it. (For example, if you take the money on 30 September, you must send it to us before 19 October; if you take the money on 1 October, you must send it to us before 19 November).

You can make a payment to us:

• by telephone/internet banking/BACs

If your bank offers a bill paying facility and you wish to make a payment using the telephone/internet banking/ BACs facility, the bank account details to quote for the transfer of funds are:

• Account Name - Preston City Council
• Sort Code - 16-28-33
• Account number - 13162739
• Bank Name - The Royal Bank of Scotland, Fishergate, Preston, PR1 2DP

Reference:This will be DEAT followed by the employee's invoice number, (this starts with a 3).This will be quoted in the correspondence sent to you by Preston City Council.

Please allow at least four working days for a payment to reach us. 

• by post

If you need to pay by cheque, make it payable to 'Lancaster City Council' and write the employee's invoice number on the back of the cheque. Please send the cheque together with the payment schedule to:

• Revenue Services, PO Box 30, Town Hall, Lancaster Road, Preston, PR1 2GD

Please do not send cash through the post.

Payment schedule

Preston City Council requires that a payment schedule be completed in order to ensure that the right payment is allocated to the right customer account; which prevents any unnecessary contact to you from Preston City Council.  

You can download a copy of the Direct Earnings Attachment Payments Schedule (PDF) [436KB] here. You will need to complete this and return it to us, but this will also be attached with our notice when we ask you to implement the DEA. 

You can use this schedule as a master copy to produce as many copies as you need. 

However, if you are making either:

• a single BACS payment in respect of an individual employee, or
• a series of single BACS payments in respect of a number of individual employees, or
• a card payment.

You do not need to complete and issue a schedule, providing that the employee's invoice number, listed as DEAT then the invoice number, is given as the reference.

In other circumstances;

• BACS payments that consolidate a number of individual payments into one payment
• cheques payments
• where a £0.00 deduction is being made

A payment schedule must be completed and issued to Lancaster City Council.

Where a number of individual payments have been consolidated into one payment, (either by BACS or Cheque), all the individual payments can be entered onto one schedule provided that the total adds up to the overall payment made.

You must include the following details for each liable person:

• their full name (forenames and surname)
• their invoice number, (listed as DEAT and then the invoice number)
• staff reference number/National Insurance number
• the amount of the deduction, (in pounds sterling), or
• the reason for nil deduction, (£0.00), if appropriate
• the total payment amount, (this should correspond to the payment you made by BACs, (online banking), or cheque))
• employers contact name and telephone number. 

Do not use this schedule to recover or deduct previous overpayments.