Direct Earnings Attachment - what micro-businesses should know

As an employer, you can be asked to deduct money from an employee's pay if they've been overpaid benefits by the Department for Work and Pensions (DWP). This is called a Direct Earnings Attachment (DEA).

‍The first time you’ll be made aware of this is when you’re 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 in England, Scotland and Wales since March 2012, and they don’t need to go through the Civil Courts.

Local authorities can also recover monies by issuing a DEA under the legislation - to recover Housing Benefit overpayments, for example (you'll receive separate notifications from them about this).

A Direct Earnings Attachment is ordered if the DWP is unable to recover money from individuals who aren’t in receipt of a benefit and who haven’t voluntarily agreed to repay the debt.

There are other deduction orders that we won’t cover here – 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'll 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're 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) takes their pay below this amount, you must adjust the amount of the order so they’re left with 60% of their net earnings. This may mean you can’t deduct any DEA amount for that period of pay. If this is the case, you need to check if a deduction applies for the next and every subsequent pay period and contract 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, the amount to recover is no longer outstanding or the amount to recover changes. The DWP will advise you of any payment changes.

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.   Statutory Maternity/Adoption/Paternity/Shared Parental Pay and Statutory Redundancy payments don't 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 doesn't work for them, or the date from which they'll 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 contact DWP Debt Management. The phone number will be at the top of the letter the employee received about the DEA
• If an employee believes the amount of money an employer has calculated is too much, then employers must first check their calculation. If it's 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 ten or more people for the majority of a six-month period.  This exemption ends six months from the date that you first had ten 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’ve been made. They won’t 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're 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.