How do I work out the amount to deduct?
When calculating the DEA 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).
- 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.
- Work out the employee’s net earnings (as previously explained in points 3 and 4).
- Use table A or B) to find the right deduction percentage rate for the employee’s net earnings.
- Apply the percentage figure against the net earnings figure to calculate the amount to be deducted.
Amounts to be deducted by the employer - Standard Rate
|
Where earnings are paid weekly Amount of net earnings |
Deduction (Per Cent of net earnings) |
|---|---|
|
Less than £100 |
5% |
|
Exceeding £100.01 but not exceeding £160 |
6% |
|
Exceeding £160.01 but not exceeding £220 |
10% |
|
Exceeding £220.01 but not exceeding £270 |
14% |
|
Exceeding £270.01 but not exceeding £375 |
22% |
|
Exceeding £375.01 but not exceeding £520 |
30% |
|
Exceeding £520.01 |
40% |
|
Where earnings are paid monthly Amount of net earnings |
Deduction (Per Cent of net earnings) |
|---|---|
|
Less than £430 |
5% |
|
Exceeding £430.01 but not exceeding £690 |
6% |
|
Exceeding £690.01 but not exceeding £950 |
10% |
|
Exceeding £950.01 but not exceeding £1,160 |
14% |
|
Exceeding £1,160.01 but not exceeding £1,615 |
22% |
|
Exceeding £1,615.01 but not exceeding £2,240 |
30% |
|
Exceeding £2,240.01 |
40% |
a) The protected earnings level
Please note: the total of all deductions (the DEA plus any other deductions in place) cannot 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.
b) Employees who are paid every 2 weeks
If an employee is paid 2 weekly, the total net wage is divided by 2 and table A is used to check the percentage rate.
c) Employees who are paid every 4 weeks
If an employee is paid 4 weekly, the total net wage is divided by 4 and table A is used to check the percentage rate.
NB: Do not leave an employee with less than 60% of their total net earnings.
d) Holiday Pay
If an 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 weeks wage and 2 weeks holiday pay. Total net payment for 3 weeks = £850.
- £850 ÷ 3 = £283.33
- £283.33 x 22% = £62.33
- Total deduction from the net wage for 3 weeks of £850 = £186.99 (£62.33 x 3).
e) Rounding
The exact amount of the net wage is used against table A & B. 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 below, as follows:
- Net wage £235.63 per week
- £235.63 x 14% = £32.988
- Weekly deduction = £32.99
- Net wage £1547.99 per month
- £1547.99 x 22% = £346.497
- Monthly deduction = £346.50
f) Administrative costs – what you can charge your employee?
For each pay period when you calculate the DEA 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.