Protected Net Earnings
Employees are entitled to keep 60% of their net pay after PAYE (but not the earners' levy), child support, and court fines are deducted. This 60% is their Protected Net Earnings, and makes sure they have enough money to cover their living expenses.
Protected Net Earnings only apply to deductions for child support and District court attachment orders, known as statutory deductions.
Protected Net Earnings don’t apply to deductions such as student loan repayments, KiwiSaver deductions, Insurances, superannuation and union fees from the Protected Net Earnings.
If you receive a deductions notice from the appropriate authority, the combined total of deductions must not be more than 40% of the employee’s net pay.
Protected Net Earnings are normally only affected if your employee receives less pay than usual for some reason. In this case, you’ll need to make sure the combined total of the statutory deductions is lowered to 40% of their new net pay.
If you deduct less than the full amount, you don’t make up the difference in future pays - this amount will be settled directly between Inland Revenue and the employee.
Protected Net Earnings need to be calculated manually, so we’ve built a calculator to help you out.
Child Support
Ace Payroll automatically reduces child support payments if they exceed 40% of an employee’s net pay.
Attachment orders
Attachment orders are not automatically reduced by Ace Payroll, and need to be manually overridden if they reduce an employee’s Protected Net Earnings.
Child Support and Attachment orders
Ace Payroll does not reduce the combined total of child support and attachment order deductions, so you may still need to manually override these deductions.
Ace Payroll
Ace Payroll doesn't reduce deductions in line with Protected Net Earnings, but it does warn you if the deductions are too high. A warning message appears when the total deductions (both statutory and voluntary) equal more than 40% of any employee’s net pay.
We recommend you check the employee’s pay to make sure any deductions which reduce their net pay below 60% are voluntary payments. If the deductions need to be lowered, you’ll need to adjust them manually. Use our calculator to make sure you're making the right adjustments.
The warning message appears on the Calculate Pays window when you perform any of these actions:
Manually override the child support amount.
Manually override the employee’s deductions.
Move between employees.
Close the window using the OK button.
The warning message may also appear on the File Regular Payroll window if there are employees in the pay run whose child support amount and/or deductions amount collectively exceed 40% of their net pay (excluding ACC).
Calculator
It can be tricky to calculate deductions and Protected Net Earnings, so we’ve built a calculator to help you out.
To use it, you’ll need to know the details of the employee’s:
Gross Pay
PAYE calculated for that gross, and
non taxable allowances.
To use the Protected Net Earnings Calculator, open the PNE Calculator preview, then click the download button in the top right hand corner and open the file in Excel.
Your obligations
Deduct child support and court fine payments from an employee’s wages if you receive a deductions notice.
Continue making the deductions until they, not the employee, instruct you to stop
Make sure you never deduct more than 40% of an employee’s net pay for these payments