Deductions: Protected earnings

Deductions: Protected earnings

A Protected Earnings deduction requires a net threshold to be applied.

This is the net $ amount that must be left over once the Protected Earnings deduction is taken. This is so you don’t deduct all of the employee's pay if they have a deduction applied to their profile e.g. child support payments.

You can nominate whether the Protected Earning threshold (net $ amount left over) applies to all deductions or only the Protected Earnings deduction. This deduction can also be set up to be taken from every payslip from a nominated start date and ongoing forever or until the nominated end date.

  Please note: The Protected Earnings deduction will apply to each payslip indefinitely or until the specified end date. The deduction will not reduce the employee's net earnings below the Protected Earnings Threshold Amount specified and will take priority over all other deductions

  Please also note: Any amount can be taken for this deduction type.

For example, if you have applied a total of $100 in the 'Amount per payslip' field and the employee only has $50 available on top of the specified protected amount, the $50 will be deducted leaving the specified protected amount to be paid to the employee. 

In this article we will cover:

  • Use cases for Protected Earning deductions
  • Setting up a deduction type in your platform
  • Applying a Protected Earnings deduction in the Employee Profile

  If you are looking for information on standard deductions then please see our helpful guide here

Use cases

In foundU, a Protected Earnings deduction can be applied to any employee for any deduction. 

A few reasons why you might use this type of deduction are:

  • Child support
  • Overpayments
  • Or, if an employee has multiple deductions - you can apply a Protected Earnings deduction so you don’t deduct all of the employee's pay. 

Child Support:

The main use for a Protected Earnings deduction is for child support payments. The Protected Earnings Amount (PEA) is the part of an employee or contractor’s pay exempt from child support deductions.

This means that you don’t deduct all of the employee's pay for child support payments.

The CSA (Child Support Agency) sends child support garnishee requests in two different formats:

  1. Section 72A Notice - This can come in the form of periodic or lump sum amounts but is most commonly a request to deduct a cent in the dollar amount. The notice will remain in place until the employee has paid back the total amount of the money owed (as outlined in the notice) or to such a point that the CSA notifies you to cease. There is no protected earnings threshold for section 72a
    notices.
  2. Notice to Commence Child Support Deductions - This notice will contain a schedule of deductions which will inform you of the amount to be deducted from the employee. The notice will explain the legal obligations as well as the protected earnings threshold requirements.

The Protected Earnings deduction allows you to apply a child support garnishee request as per above in the Employee Profile. 

  See here for more information on the Protected Earnings Amount (PEA).

Overpayments:

You may want to apply a Protected Earnings deduction to an employee that is required to make repayments i.e. due to overpayment so you can specify the net $ amount that must be left over once the protected earnings deduction is taken. 

This is so you can ensure your employee is not left short due to the overpayment. 

A Protected Earnings deduction can be set up to be taken from every payslip from a nominated start date and ongoing forever or until the nominated end date. 

If an employee has multiple deductions: 

You may want to apply a Protected Earnings deduction to an employee that has multiple deductions applied to their profile. 

This is so the Protected Earnings threshold relates to ALL deductions on the Employee Profile.

Therefore, the Protected Earnings deduction will be taken first as a priority and if there are any net wages left over the other deductions will be taken up to the value of the specified 'Protected earnings net threshold'.

  Please note: The other deductions must be taken in full – they cannot be partially taken.

Set up a deduction type in your platform

In order to add a deduction to an Employee Profile, you'll first need to set up a Deduction Type in Payroll Settings > Deductions

For steps on how to set up a new Deduction Type in your platform please refer to our helpful Deductions article.

If the relevant Deduction Type has already been set up in your platform i.e. Child Support then please read on. 

  Please note: This deduction type cannot be seen by the employee in their Employee Portal, even if specified as 'Candidate Managed'.

Applying a Protected Earnings deduction in the Employee's profile

Once you have created your Deduction Type in your platform you will then need to apply the deduction to the relevant Employee Profile. 

  Please note: The Protected Earnings deduction will apply to each payslip indefinitely or until the specified end date. The deduction will not reduce the employee's net earnings below the Protected Earnings Threshold Amount specified and will take priority over all other deductions. 

To add a Protected Earnings deduction to an Employee Profile:

  1. Go to People > Approved People, find the employee, and click on their name to go to their profile.
  2. Click on the Financial tab.
  3. Select the Deductions section > Add Deduction. 
  4. Select the 'protected earnings deduction' option as the Deduction Type. 

  5. Complete the deduction details:

      Please note: Only deductions set with the 'Value Type' of dollar value ($) will appear when applying a Protected Earnings deduction to an Employee Profile.

    • Type - i.e. Overpayment, Child Support etc. 

    • Reference - The reason for the deduction, e.g. Overpaid on 02-11-21 or Child Support payment. 

    • Enter any relevant bank details if paying into another account.
    • Total Amount - The total amount that needs to be deducted from the employee e.g. $250 is the total amount required to be deducted. This is the total amount that needs to be paid off over a period of time until the amount reaches $0.00.

    • Amount per payslip - This is the instalment amount to be deducted from each payslip. 

    • Protected earnings net threshold - The $ figure of earnings to be exempt from deductions e.g. $429.98 per week.

        Please note: Any amount can be taken for this deduction type. For example, if you have applied a total of $100 in the 'Amount per payslip' field and the employee only has $50 available on top of the specified protected amount, the $50 will be deducted leaving the specified protected amount to be paid to the employee. 

    • Protected earnings net threshold applies to - Protect earnings from all deductions or just one deduction.

    • Start From - Select the first period ending you would like the deduction to start.

    • Recur until - Select the period ending you would like the deduction to end. If no date is specified the deduction will recur indefinitely.

  6. Click Add Deduction.

  Please note: If the Protected Earnings deduction is applied after the employee's draft payslip has been generated, the deduction will not go through to the pay cycle. In this case, you will need to reprocess the pay cycle/draft payslip for the deduction to be applied. Protected Earnings deductions cannot be manually applied to or edited in the payslip.