Understanding Attachment of Earnings Orders

An Attachment of Earnings Order (AEO) is a legal document issued by a court, typically instructing an employer to directly deduct payments for an outstanding debt from an employee’s wages. AEOs can be issued for various reasons, including unpaid fines and child support. Understanding the types of earnings subject to AEOs is crucial to ensure compliance with payroll deductions.

Types of Attachable Earnings: Payroll deductions for AEOs are made from attachable earnings, which generally include:

1. Wages or salary, including fees, bonuses, commission, overtime pay, holiday pay, and any additional amounts payable under an employment contract.
2. Pension payments, such as annuities for past services and periodical payments compensating for loss or reduction in earnings.
3. Statutory Sick Pay (SSP).

Note that pension payments are not attachable for collecting unpaid council tax or child maintenance or for orders raised under the Debtors (Scotland) Act 1987 if made under an occupational pension that does not allow the assignment of such payments.

Non-Attachable Earnings: There are two common types of non-attachable earnings:

1. Statutory payments, excluding SSP. This includes statutory maternity pay, statutory paternity pay, statutory adoption pay, statutory shared parental pay, and statutory parental bereavement pay.
2. Pensions or allowances payable in respect of disablement or disability.

Protected Earnings: To ensure an employee maintains sufficient income, the court may establish a protected earnings amount, which appears on the AEO. The employee’s net pay must stay within this amount. If the full deduction cannot be made due to protected earnings, the remaining balance may be carried forward into the next period, depending on the type of attachment in use.

In summary, attachable earnings for AEOs typically include wages, salaries, bonuses, overtime, holiday pay, and statutory sick pay. Other statutory payments, such as maternity pay, are not considered attachable earnings. Employers should ensure compliance with HMRC guidance when processing payroll deductions for AEOs and consult the issuer of the AEO for clarification when needed. If you need help with Attachment of Earnings Orders, please contact Tax Accountant at 0800 135 7323 or email info@taxaccountant.co.uk for expert advice.