How deductions are made
The DEO states a ‘normal deduction rate’ and a ‘protected earnings proportion’.1Reg 9 CS(C&E) Regs The ‘normal deduction rate’ is the amount deducted each payday, provided it does not bring the non-resident parent’s net earnings below a certain amount (the protected earnings proportion). The normal deduction rate can include the current child support liability and an amount for any arrears, penalty payments and any fees due. There are no special rules on how quickly the CMS should aim to clear the liability, although often the maximum deduction rate of 40 per cent of net earnings is applied.
More than one normal deduction rate can be set, each applying to a different period.2Reg 9(d) CS(C&E) Regs Earnings
‘Earnings’ include wages, salary, fees, bonuses, commission, overtime pay, occupational pension or statutory sick pay, any other payment made under an employment contract and a regular payment made to compensate for loss of wages.3Reg 8(3) and (4) CS(C&E) Regs Earnings do not include working tax credit, any social security benefit or disability benefit, a payment by a foreign government or the government of Northern Ireland, or a payment to a special member of a British reserved armed force.4Reg 8(4) CS(C&E) Regs ‘Net earnings’ is the amount remaining after income tax, national insurance (NI) and contributions towards a pension scheme have been deducted.5Reg 8(5) CS(C&E) Regs The ‘protected earnings proportion’ is 60 per cent of net earnings.6Reg 11(2) CS(C&E) Regs Deductions must not reduce earnings below this level. The CMS does not know the non-resident parent’s net earnings or pay frequency, as it receives only gross income information from HMRC. The employer is therefore responsible for calculating the protected earnings proportion. The CMS provides employers with pay frequency options for weekly, fortnightly, four-weekly and monthly pay, from which the employer selects the normal deduction rate corresponding to the parent’s pay frequency.7Regs 10(1) and (2) and 11 CS(C&E) Regs, as substituted for ‘2012 rules’ cases and other ‘arrears only’ cases by reg 4(4) CS(MOC&NCR) Regs If the parent is paid at a different frequency, the CMS must cancel the DEO.8Reg 10(3) CS(C&E) Regs, as substituted for ‘2012 rules’ cases by reg 4(4) CS(MOC&NCR) Regs Example: when an employer can deduct the full normal deduction rate
The client’s net earnings are £1,200 a month.
The minimum amount they must take home (protected earnings proportion) is £720 a month.
Net earnings of £1,200 minus the protected earnings proportion of £720 = £480
The amount they owe in child maintenance (normal deduction rate) is £150 a month.
In this case, the client has enough left for the employer to deduct the full normal deduction rate amount of £150.
Example: when an employer cannot deduct the full normal deduction rate
The client’s net earnings are £500 a month.
The minimum amount they must take home (protected earnings proportion) is £300 a month.
Net earnings of £500 minus the protected earnings proportion of £300 = £200
The amount they owe in child maintenance (normal deduction rate) is £250 a month.
In this case, the client does not have enough left for the employer to deduct the full normal deduction rate amount of £250
The employer should send £200 to the CMS. The shortfall of £50 is carried forward to the next pay period.
If an employer cannot deduct the full normal deduction rate, they must:9Reg 12 CS(C&E) Regs •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 the CMS.
Employers then deduct the full amount of the shortfall plus the normal deduction rate owed for the next pay period but must still leave the client with the protected earnings proportion.
If the shortfall is carried forward for several weeks before being repaid, the employer should keep a record of the ongoing shortfall. The CMS or court may need to review a normal deduction rate if a client consistently cannot pay it.
The employer must ensure that the deduction leaves their employee with the amount of their protected earnings unless the deduction is for administrative costs. An employer can deduct an admin charge of £1 from their employee’s wage.