What counts as earnings

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:

If any of these payments are your employee’s only income, do not make a deduction. You should update your payment schedule.