Disposable Earnings

Meaning & Definition

An employee’s disposable earnings are made up of their wages (after taxes, social security, etc.). After all deductions for mandatory (tax) purposes are deducted from earnings, your total earnings will be called disposable earnings. It will be used to determine whether or not you can have a portion of your disposable income recovered through covering, attachment, etc.

Important feature of Disposable Earnings

• Determining your recoverable wages or wages subject to attachment. 
• Calculating your payroll, payroll taxes, and related statutory amounts correctly. 
• Providing support and upholding compliance with the laws and regulations regarding wage deductions. 
• Ensuring there is transparency about your salary structure.
• Handle legal actions against your wages due to a court order (or other types of legal recoveries).

Compliance Requirements

In India, the deductions from wages are regulated by the Payment of Wages Act, 1936, as well as applicable labour law provisions and judicial orders. The employer is required to ensure that all deductions do not exceed the maximum permissible amounts and that all deductions are taken only from the employee’s disposable earnings as provided for by law.