What counts as earnings
How CMS calculates earnings for the purposes of deduction from earnings orders.
A Deduction from Earnings Order (DEO) can only be made from an employee's net earnings.
When calculating a DEO amount, net earnings means earnings after the deduction of:
- Income Tax
- Class 1 National Insurance
- pension or superannuation contributions
You can make a deduction from the following earnings:
- wages, fees, bonus, commission, overtime pay or any payments on top of wages
- private or occupational pensions and compensation payments
- Statutory Sick Pay
- contractual sick pay
- contractual maternity pay
- contractual paternity pay
- contractual adoption pay
- contractual redundancy pay
Statutory pay is money that your employees are entitled to by law. Contractual pay is what you agree with your employees in addition to statutory pay.
What does not count as earnings
You cannot make a deduction from any of the following:
- amounts paid by a public department of any country outside the UK
- any social security pension, allowance, or benefit
- tax credits
- any pension or allowance paid for disability
- guaranteed minimum pension within the Social Security Pensions (Northern Ireland) Order 1975
- Statutory Maternity Pay
- Statutory Paternity Pay
- Statutory Adoption Pay
- Statutory Redundancy Pay
If any of these payments are your employee's only income, do not make a deduction. You should update your payment schedule.
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