Introduction to AEOs in Sage Payroll.
An attachment of earnings order (AEO) is an official form issued to an employer. It is usually issued by a court. It's an instruction to deduct an outstanding debt from an employee via their wages. This could be for many reasons, including unpaid fines and child support.
The purpose of the AEO is to enforce the employee’s obligation to pay one of the following:
- Spouse or child support
- Outstanding council tax
- A debt or fine
The court order specifies the type of AEO that applies. The court sends the employer a form containing the following information:
- The AEO type
- The total amount payable by the employee during the lifetime of the order
- The employee’s Protected Earnings Rate (PER)
- The employee’s Normal Deduction Rate (NDR)
- The order to deduct the AEO amounts if more than one AEO applies to the employee’s income
Attachable earnings is the part of the employee’s income in a pay run that can be subject to AEOs. These include:
- Wages and Salary
- Pension payments (although these are not subject to Council Tax AEOs)
- Statutory Sick Pay
Residual pay can be subject to AEOs after the following types of deduction:
- Income Tax (PAYE)
- Pension, allowances, or any benefits relating to social security
- National Insurance contributions
- Superannuation or pension contributions
The following types of employee income are exempt from AEOs:
- Disability Pension
- Statutory Maternity, Paternity, Adoption pay
- Tax Credits
- Guaranteed minimum pension
The AEO may specify a protected earnings rate (PER).
The PER is the lowest amount the employee must have left after the AEO amount has deducted each pay run. The employee must meet essential living expenses, such as food, rent, and other bills.
The AEO amount may get reduced to ensure that the employee achieves the PER amount. If the employee’s net pay falls below the PER amount in a particular pay run, no AEO deduction happens.
AEO types get organised into two broad categories:
Value-Based AEOs
There are two kinds of value-based order:
- Priority Orders (shortfalls carried forward to the next pay period)
- 1971 Priority AEO (Maintenance) (Based on a weekly rate)
- 1971 Priority AEO (Court Fines) (Based on a weekly rate)
- Child Support DEO (Based on a weekly rate)
- Non-Priority Orders (shortfalls not carried forward to the next pay period)
- 1971 Non-Priority AEO (Civil Debts) (Based on a weekly rate)
- Current Maintenance Arrestment (Based on a daily rate)
Table-Based AEOs
These are AEOs that apply a fixed deduction amount. The amount specified in the relevant deductions table.
- Council Tax AEO
- Court Fines (Post April 2004)
- Earnings Arrestment
TIP: Earnings Arrestment is the Scottish equivalent of the Attachment of Earnings mechanism.
This type of order is used to enforce the employee’s obligation to pay a civil debt. This may be a fine, community charge arrears, or council tax arrears.
TIP: The AEO amount to deduct is determined by attachment band parameters.
For HMRC’s guidance on how AEOs work, see these HMRC examples (opens in new tab).
- Solution ID
- 222001000101566
- Last Modified Date
- Wed Nov 15 07:30:47 UTC 2023
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