How to calculate deductions
The deduction from earnings order (DEO) will show 2 rates.
|Rate||What it Means|
|Normal deduction rate (NDR)||The amount your employee owes in child maintenance. You'll deduct this from their pay.|
|Protected earnings proportion (PEP)||The minimum pay you must make sure your employee takes home after all deductions have been made.|
You must make sure that your deduction leaves your employee with the amount of their protected earnings, unless the deduction is for administrative costs.
How much to deduct
You may not always be able to deduct the full NDR from your employee's pay.
This depends on how much they have left in net earnings once you've taken in account their PEP.
You can deduct up to £1 for administration costs.
Example - where you can deduct the full NDR
Your employee's net earnings are £1,200 a month.
The minimum amount they must take home (PEP) is £1,000 a month.
Net earnings of £1,200 minus the PEP of £1,000 = £200.
The amount they owe in child maintenance (NDR) is £150 a month.
In this case, the employee has enough left for you to deduct the full NDR amount of £150.
Example - where you can't deduct the full NDR
Your employee's net earnings are £900 a month.
The minimum amount they must take home (PEP) is £750 a month.
Net earnings of £900 minus the PEP of £750 = £150.
The amount they owe in child maintenance (NDR) is £200 a month.
In this case, the employee doesn't have enough left for you to deduct the full NDR amount of £200.
You should send £150 to the Child Maintenance Service.
The shortfall of £50 is carried forward to the next pay period.
If you can't deduct the full NDR
- keep a record of the shortfall
- carry forward the shortfall to the next period
- send any deduction you've been able to make to the court or Child Maintenance Service
You then deduct the full amount of the shortfall plus the NDR owed for the next pay period. You must still leave your employee with the PEP.
If the shortfall is carried forward for several weeks before being repaid, keep a record of the ongoing shortfall.
The Child Maintenance Service or court may need to review an NDR if an employee consistently can't pay it.
If you pay your employee holiday pay in advance
You'll have to:
- calculate your employee's total net earnings for the pay period
- multiply the PEP and the NDR by the number of weeks in the pay period
- set aside the combined PEP and take off the combined NDR in the usual way
Example - including holiday pay in advance
In this example, the earnings include 1 week's pay plus 2 weeks' holiday pay paid in advance.
Your employee has net earnings of £160 a week.
The NDR is £32 a week and the PEP is £96 a week (60% of their net income).
Net earnings are £160 x 3 = £480 (1 week's pay + 2 weeks' holiday pay).
Take away the PEP of £96 x 3 (£288). This leaves £192, so you'd send the Child Maintenance Service the full NDR of £96 (£32 x 3).
If you have any questions you can contact the Child Maintenance Service:
The service also lets you:
- see all deductions for the Child Maintenance Service
- report and make changes
- send messages
- see important information you've been sent
You can also call if you have any questions.
Child Maintenance Service Employer Payment Team
Telephone: 0800 232 1961
Text relay number: 18001 0800 171 2345
nidirect guidance on contacting 08 and 03 telephone numbers.