How to make deductions
When employers will receive a deduction from earnings order from CMS, what they should do with it and why it might need to be amended.
You must deduct the amount of child maintenance stated on the deduction from earnings order (DEO) from your employee’s net earnings or pension.
By law you must send payments to the Child Maintenance Service. They’ll send the money to the other parent to help cover their child’s living costs.
How it works
- Check what counts as earnings.
- Calculate 60% of your employee’s net earnings (known as their ‘protected earnings’).
- Make the deduction from your employee’s net earnings - as long as it leaves them with their protected earnings.
- Take off an extra £1 towards your administrative costs (if you want to).
- Send the deduction to the Child Maintenance Service.
If you’re unable to deduct the full amount from their protected earnings, you must send an updated payment schedule to the Child Maintenance Service.
How to calculate protected earnings
You must make sure that your deduction leaves your employee with at least 60% of their net earnings (known as ‘protected earnings’).
You can still deduct the £1 administrative cost if it takes your employee’s income below their protected earnings rate - but not if it takes their income below the National Minimum Wage.
If you can deduct the full amount from your employee’s protected earnings
Deduct the full amount from your employee’s earnings if it does not affect their protected earnings. Send it to the Child Maintenance Service as soon as you make the deduction.
Example
The amount your employee owes in child maintenance is £150 a month.
Your employee’s net earnings are £1,200 a month.
Their protected earnings are £720 a month.
Net earnings of £1,200 minus the protected earnings of £720 = £480.
In this case, the employee has enough left for you to deduct the full amount of £150.
If you cannot deduct the full amount from your employee’s protected earnings
If you cannot deduct the full amount, you must:
- send any deduction you’ve been able to make to the Child Maintenance Service
- keep a record of the unpaid difference
- send an updated payment schedule to the Child Maintenance Service
You must calculate the unpaid difference, plus the regular amount your employee owes in child maintenance the next time you pay them. You must still leave your employee with their protected earnings.
Example
The amount your employee owes in child maintenance is £250 a month.
Your employee’s net earnings are £500 a month.
Their protected earnings are £300 a month.
Net earnings of £500 minus the protected earnings of £300 = £200.
In this case, the employee does not have enough left for you to deduct the full amount of £250.
You must send £200 to the Child Maintenance Service.
The unpaid difference of £50 is carried forward to the next time you pay your employee.
If the unpaid difference is carried forward for several weeks before being repaid, keep a record of the ongoing amount.
If you pay your employee holiday pay in advance
You’ll have to:
- calculate your employee’s total net earnings for the pay period
- multiply the protected earnings and the deduction by the number of weeks in the pay period
- send the deduction to the Child Maintenance Service
Example
The earnings include 1 week’s pay plus 2 weeks’ holiday pay paid in advance.
Your employee has net earnings of £160 a week.
The amount your employee owes in child maintenance is £32 a week and the protected earnings are £96 a week.
Your employee’s net earnings are £160 x 3 = £480 (1 week’s pay + 2 weeks’ holiday pay).
Net earnings of £480 minus the protected earnings of £96 x 3 (£288) = £192
In this case, the employee has enough left for you to deduct the full amount of £96 (£32 x 3).
If you need to deduct other debts from your employees' pay
If your employee has other debt to pay, for example, council tax debt, a court can issue:
- an Attachment of Earnings Order (England, Wales, and Northern Ireland)
- Earnings Arrestment Order (Scotland)
How you prioritise a deduction depends on which country the order was issued in.
In England, Wales, and Northern Ireland, a DEO takes priority unless you have received a priority Attachment of Earnings Order (AEO) for your employee.
In Scotland, a DEO takes priority over other deductions.