Direct earnings attachment for employers

We are responsible for recovering money owed to it in respect of debts arising under the Social Security Administration Act 1992. Since April 2013, local authorities have been given the power to recover overpaid Housing Benefit by deductions from earnings without the need to apply for a court order. This is done by using a Direct Earnings Attachments (or DEA). Local authorities were given this power by The Social Security (Overpayments and Recovery) Regulations 2013 and The Social Security (Overpayments and Recovery) Amendment Regulations 2015.

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 you may still receive requests to implement deductions for a DEO or AEO for your employees.

Why we use DEAs

Not everyone enters into a voluntary repayment agreement. DEAs give us the opportunity to recover overpaid benefits from debtors who are employed if they either refuse to repay, are unable to agree an acceptable repayment plan or who have defaulted on a voluntary repayment arrangement.

Employers have a legal obligation to apply the DEA unless they are a micro business and started before 8 April 2013 (having fewer than 10 employees). In such cases employers are not obliged to operate a DEA although they may do so. If you fail to comply with your duties you could be subject, on conviction, to a fine of up to £1000.

Payroll software

If your system cannot deal with DEAs you will need to follow the instructions below as well as the general guidance in this document. Until your software is updated if you receive a request to set up a DEA you will need to:

• manually calculate the amount to deduct from earnings
• manually check whether there are any other orders currently in place - as the DEA may take priority over these.
• in cases where the DEA does take priority over another order, consider whether other orders need to cease or deduction amounts be recalculated
• 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

Your responsibilities as an employer

You have a legal obligation to

• implement a Direct Earnings Attachment when we ask you to make deductions from the employee’s net earnings
• make payments of the amounts deducted 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 we advise you to stop, the debt is cleared, or your employee leaves your employment
• ensure you take the right amount from your employee’s earnings each week or month and pay it to us

Providing information

We will send you a notice asking you to apply a DEA to your employee’s earnings. This will include all the information you need to have in order to set up the DEA.

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 micro business started before 8 April 2013 (still having fewer than 10 employees), as defined in the regulations.

You must write to us at the address shown on the DEA request letter within 10 days of the date of that letter if any of the above applies to you. You should also let us know if your business ceases trading.

You have a duty to notify your employee in writing of:

• the amount of the deduction taken, including any amount taken for administrative costs (if this information is shown on their payslip, it will be allowed).
• how that deduction was calculated

You must do this and record it no later than the payday after the one on which the deduction for the DEA was taken. Please contact us 01622 602311 if you require any further information or help operating this DEA.

How to apply a DEA

We will send you a letter (officially called a notice) which tells you to apply a DEA for your employee and gives you the information you will need in order to apply it. This includes:

• the name and National Insurance number of the person from whose wages you will make the deduction
• if we have it, their staff number, payroll number or similar identifying number
• the percentage rates at which deductions are to be made
• the proportion of their wages which is protected
• when to send us payments
• the address to which you are to send the payments if you are going to pay by cheque
• details of the account into which the payments are to be transferred if you are paying us by direct credit transfer

Deductions

Once you receive the notice you will need to check that your employee earns enough to allow a deduction to be made. If they do, you then calculate how much to take from their earnings using the information provided and make the deductions.

Payments counted as earnings

If the only earnings your employee receives are those in the right-hand column, you cannot calculate a DEA deduction. 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.

Net earnings

You must take the amount for the Direct Earnings Attachment directly from your employee's net earnings. Net earnings are the earnings left after deduction of:

• Income Tax
• class 1 National Insurance contributions
• contributions to a work place pension (including additional voluntary contributions, free standing additional voluntary contributions and stakeholder pension contributions)

Amounts to be deducted

When calculating the deductions amount you must:

• ensure that your employee has enough net earnings in the pay period for you to calculate a deduction (see tables A, B, C and D below).
• check that the correct percentage rate has been applied against those net earnings
• check that the total of all the 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

Table A - weekly earnings (standard rate)

Table B - monthly earnings (standard rate)

Table C - weekly earnings (other rate)

Table D - monthly earnings (other rate)

Protected earnings level

The total of all deductions (the DEA plus any other deductions in place) cannot leave your employee with less than the protected earnings proportion, which is 60% of your total net earnings during the calculating period to which the deduction relates.

Employees who are paid every two weeks

If your employee is paid two weekly, the total net wage is divided by 2 and table A or C is used to check the percentage rate.

Employees who are paid every four weeks

If your employee is paid four weekly, the total net wage is divided by 4 and table A or C is used to check the percentage rate.

Do not leave an employee with less than 60% of their total net earnings.

Holiday Pay

If your 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. For example:

The employee received one week’s wage and two weeks holiday pay. Total net payment for three weeks = £850.

£850 ÷ 3 = £283.33

£283.33 x 11% = £31.17

Total deduction from the net wage for three weeks of £850 = £93.51 (£31.17 x 3).

Rounding

The exact amount of the net wage is used against table A, B, C or D. 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. For example:

Net wage £235.63 per week
£235.63 x 7% = £16.4941
Weekly deduction = £16.49

Net wage £1547.99 per month
£1547.99 x 11% = £170.278
Monthly deduction = £170.28

Administrative costs

For each pay period when you calculate the deduction you may also take up to £1 from your employee’s earnings towards administrative costs. You can take this even if it reduces the employee’s income below the protected earnings proportion.

Employer deductions

If you fail to take a deduction from your employee's net earnings when you should have 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 that 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 for the previous 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 that deduction amount by the excess previously taken.

If a deduction is reduced in any week or month because the DEA along with any other orders in place will breach the protected earnings limit this is not considered a shortfall as described above. A shortfall only occurs when an incorrect amount has been deducted in error, or where one or more deductions have been missed.

Other court orders

Courts can make orders that you must take money directly from your employee's earnings in a similar way to how we ask you to make deductions for a DEA. For example, your employee may have an Attachment of Earnings Order or a Deduction from Earnings Order (for child maintenance). The DEA can be imposed without a court order, but if your employee has any other deduction orders against them there are rules that tell employers which money they should take first.

If your employee has one or more of the following in place they will take priority:

England and Wales

• Deduction from Earnings Order (DEO) from the Child Maintenance Group (CMG)
• Attachment of Earnings Order (AEO) for Maintenance or Fines
• Council Tax Attachment of Earnings Order (CTAEO)

Scotland

• Deduction of Earnings Order (DEO) from CMG
• Earnings Arrestment (EA)

Student loans

A student loan repayment also takes priority over a DEA. This applies to both England, Wales and Scotland. Once these priority orders have been taken into account in your calculation a DEA will then take priority in relation to other orders or notices in date order (in Scotland this will be the date they were received). The amount you can deduct will be subject to the available net earnings above the protected earnings limit of 60% of net earnings.

Other information

If the weekly or monthly earnings are below the threshold (see table A, B, C and D) the DEA deduction cannot be calculated and we must be advised of this. You must continue to calculate whether a DEA deduction can be made, each pay period until either we tell you to stop or your employee leaves your employment.

If your employee thinks that the amount of money they owe is wrong, you should advise them to contact us 01622 602311. If they think that the amount you have calculated is too much, you should first check that the amount being deducted is correct according to table A, B, C or D on the basis of their earnings and other orders in place. If the amount is correct, you should explain that you have made the deduction as instructed to do so. If they feel that this is too much for them to manage, you should advise them to contact us.

Operating a DEA

Once you have started operating a DEA, you must continue to make payments to us until we tell you to stop or you have deducted the maximum amount that needs to be recovered from the earnings. We shall contact you when deductions are to cease or if the amount deducted should change. If there is a change of circumstances which means that you can no longer operate the DEA, you must notify is in writing within 10 days of that change happening. In the first instance though, please phone us to let us know as we may be able to speed up the administration process. If you need to tell us about a change like please contact us 01622 602311.

Payments

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

• make regular payments to us until we tell you to stop or the maximum amount to be recovered has been taken from your employees earnings
• pay the amount you have taken from your employee’s wages over to us as soon as possible, but no later than the 19th 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.

Bacs (Bankers Automated Clearing System)

This is our preferred method of payment because of its security and quick clearance times. When setting up a payment by this method, you will need the following information:

Maidstone Borough Council
Sort code - 30-00-02
Account number - 00574428
Bank - Lloyds
Employee's invoice number -  This will be shown on the DEA Notice you will be sent

If the payment is for one employee, enter the employee’s invoice number. If the payment covers multiple employees, enter ‘DEA’ as reference you will need to send a Direct Earnings Attachment payment schedule to us so we know who the payment refers to.

Phone

If your bank offers a bill paying facility and you wish to make a payment using the telephone/internet banking/automated credit transfer, the bank account details to quote for the transfer of funds are the same as above.

Payment schedule

For payments by Bacs or cheque you must send us a Direct Earnings Attachment payments schedule.

The schedule must include the following details for each person for whom you were asked to make deductions from earnings:

• their full names (first names and last names)
• their invoice number as shown on the notice you were sent
• the amount of the deduction (in pounds sterling) that has been deducted or
• the reason why a deduction cannot be made when appropriate

The amount of the payment must be the same as the total amount of deductions shown on the payment schedule. Please do not send cash through the post. You can email a copy of the schedule to us and the payment can follow.

Examples

Example 1 - 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 - weekly paid earner with an existing attachment order for child maintenance

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 - monthly paid earner with existing priority attachment orders.

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 DEA deduction is = £243 £648 – £486 = £162 (maximum amount available for the DEA deduction) Therefore, although the deduction rates table states that a deduction of £243 should be taken, the protected earnings limit means that the amount will be restricted to £162.

If you need more information about or help to operate a Direct Earnings Attachment, please contact us 01622 602311.

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