As an employer, you can be asked to deduct money from an employee’s pay if they have been overpaid benefits by the Department for Work and Pensions (DWP). This is called a Direct Earnings Attachment.
The first you’ll be aware of this is if you are contacted by the DWP Debt Management team asking you to make deductions directly from your employee’s earnings by operating a DEA.
DWP Debt Management have been allowed by law to do this since March 2012, in England, Scotland and Wales, and they do not need to go through the Civil Courts.
Local authorities can also recover monies by issuing a Direct Earnings Attachment under the legislation – for example to recover Housing Benefit overpayments (you will receive separate notifications from them about this).
A Direct Earnings Attachment is ordered if the DWP is unable to recover money from individuals who are not in receipt of a benefit and who have not voluntarily agreed to repay the debt.
There are other deduction orders that we won’t cover here, such as a Deduction from Earnings Order, and Council Tax Attachment of Earnings Order – all can be received for the same employee at the same time as a DEA. Generally a Deduction of Earnings Order from the Child Maintenance Group will take priority for payment over a Direct Earnings Attachment.
How do you receive a Direct Earnings Attachment (DEA) notice for an employee?
DWP Debt Management will send you a formal notice for each affected employee asking you to implement a DEA. This notice will have basic instructions on how to do this and will include the employee’s National Insurance number, which you will need to quote on any correspondence or payments you make.
What legal responsibilities does an employer have?
- To calculate a deduction based on the net earnings* for each pay date, or to apply a fixed amount calculated by DWP if you are asked to do so.
- Employees must be left with at least 60% of their net wage after these deductions (called Protected Earnings), so if the DEA deduction (along with any other deduction order) would take their pay below this amount you must adjust the amount of the order so they are left with 60% of their net earnings.This may mean you cannot deduct any DEA amount for that pay period. If this is the case you need to check if a deduction applies for the next and every subsequent pay period and also contact the DWP to inform them of this.
- Pay the amounts deducted to the DWP by the 19th day of the month following the month in which the deduction is made (e.g. if an employer deducts money from an employee on 30th September, they must send it to the DWP Debt Management by 19th October). Payment can be made by BACS, cheque, or card.
- Keep a record of each employee for who a DEA deduction has been made (with the amount of each deduction).
- To calculate a DEA deduction every pay day until the DWP tells you to stop; the employee leaves; the employee dies, or the amount to recover is no longer outstanding or the amount to recover changes and you are advised by the DWP of this.
*Net earnings means after the deduction of Income Tax, Class 1 NIC and any Pension contributions. Earnings means wages, salary, fees, bonuses, commission, overtime pay, SSP, payment in lieu of notice. But, Statutory Maternity/Adoption/Paternity/Shared Parental Pay and Statutory Redundancy payments do not count as earnings; neither do pensions; benefits or allowances paid by the DWP, local authority or HMRC; or sums paid to reimburse expenses incurred during employment.
Employers must also:
- Notify the DWP within 10 days of the date of the DEA notice if the employee does not work for them, or the date from which they will cease to work for them.
- Notify the employee in writing of the amount of the deduction taken including any amount taken for your administration costs, and how the deduction amount was calculated. This can be done on their payslip although the employee should know that deductions will be made well in advance of the first deduction.
- Employers can deduct up to £1.00 from their employee’s earnings towards their administration costs every pay period in which a DEA deduction is made.
- If an employee believes the amount of money they owe is wrong, employers should ask them to contract DWP Debt Management. The telephone number will be at the top of the letter the employee received about the Direct Earnings Attachment.
- If an employee believes the amount of money an employer has calculated is too much, then employers must first check their calculation. If it is correct they must explain this to the employee.
Micro-businesses that existed before 8th April 2013 are exempt from making a DEA until they employ 10 or more people for the majority of a six month period. This exemption ends six months from the date that you first had 10 or more employees.
What responsibilities do DWP Debt Management have?
- To contact the employer if they fail to make the payment in time.
- Refund monies directly to the employee where the debt has been reduced to zero, or directly to the employer where no DEA payment should have been made. They will not return monies to an employer where the DEA Payment was applicable but was calculated at the incorrect (higher) rate.
More detailed Guidance from the DWP (with examples) is provided here. They have an employer helpline which is 0345 600 0685.
If you are an employer and need ongoing professional help with any staff/freelance issues, or a Contractor/Freelancer/Employee with a complicated employment related problem, then talk to Lesley at The HR Kiosk – a Human Resources Consultancy for small businesses – our fees are low to reflect the pressures on small businesses and you can hire us for as much time as you need.
Please note that the advice given on this website and by our Advisors is guidance only and cannot be taken as an authoritative or current interpretation of the law. It can also not be seen as specific advice for individual cases. Please also note that there are differences in legislation in Northern Ireland.