How to apply a wage garnishment

What is it for?

When the company receives a notice garnishing an employee's salary, it must withhold the garnishable part every month and pay it to whoever the notice indicates. fiscaldoo stores the garnishment, calculates on each payslip the part that can be withheld (leaving the employee the minimum the law protects) and tracks how much is still to be withheld up to the amount of the claim.

When to use it?

• A garnishment notice has arrived from an enforcement agent (civil enforcement).
• A garnishment notice has arrived from the AT or Social Security (tax enforcement).
• The garnishment is for maintenance (child or spousal support), which has its own rules.

Where to find it?

Payroll › Prepare › Deductions and loans › Garnishments › New

Before you start

• The Payroll Processor records the notice (state Incoming). Validate and Activate belong to the Payroll Administrator: with the Processor, fiscaldoo refuses (see “Common problems”).
• Have the notice at hand: case number, creditor, enforcement agent, notice date, amount of the claim and where to deposit.
• The contact of whoever receives the money exists in Contacts. If not, ask someone with the Accountant profile to create it, in Contacts › New.
• The Wage garnishment pay item has a posting template. If not, create it as explained in How to post the payroll, with Debit account 231290, Credit account 2781 and Partner Other third party.

How to use it

1. Open Payroll › Prepare › Deductions and loans › Garnishments. With no garnishments, the list says: “The wage garnishments of the workers appear here; create one with New, choosing the worker.” Click New.
2. In Worker, choose the employee, for example Trabalhador F.
3. Enter the Process number as it appears on the notice, for example 1234/26.0T8LSB.
4. In Kind of claim, choose Ordinary debt (art. 738.º/1 to 3) or Maintenance (alimentos, art. 738.º/4).
5. In Territory of the worker, choose Mainland, Azores or Madeira. In Enforcement, choose Civil enforcement (CPC art. 779.º) or Tax enforcement (CPPT art. 227.º).
6. Enter the Creditor and the Enforcement agent, and check the Notification date. Fill in Days to deposit if the notice states it. Order set by the agent is read-only on the form: it is recorded with Modify, after Validate.
7. Enter the Amount of the claim, for example 2000. If the notice sets a monthly amount, enter it in Maximum per month. No other income is ticked: untick it if the employee has other income. Tick Coefficient 0.75 (art. 151.º CIRS income) only if the notice or the employee proves it.
8. Save. The garnishment is Incoming and Still to withhold shows the amount of the claim (€2,000.00).
9. With the Payroll Administrator profile, open the garnishment and fill in, under Where the withheld amount is paid, the Payee contact (accounting) and the Account of the deposit. If the contact does not exist, the field answers No records: ask someone with the Accountant profile to create it, in Contacts › New.
10. Click Validate (it becomes Validated) and then Activate. The garnishment is Active, with the Suspend, Modify, Lift and Extinguish buttons. The buttons change with the state: in Incoming, only Validate; in Validated, Activate, Modify and Lift. In Validated the screen says: “The garnishment is validated but not active yet, so its data are not edited. Activate it to start the withholding, amend it with a new notification of the agent, or lift it.” In Active the screen says: “The garnishment is “Active”, so its data are not edited. A new notification of the agent is registered with “Amend” (amounts and date).”

Example. Trabalhador F earns €1,450.00. On the November payslip, the Wage garnishment line withheld €349.50 and How was it calculated? shows the calculation:

• Net part: €1,450.00 − IRS €21.00 − Social Security €159.50 = €1,269.50.
• Two thirds of the net part (€846.33) would be below one minimum wage, so the minimum wage is non-garnishable: €920.00.
• Garnishable: €1,269.50 − €920.00 = €349.50. As the claim is €2,000.00, everything garnishable is withheld.
• The meal allowance (€129.15) was not included in the net part: the employee received €1,049.15, that is €920.00 plus the allowance.

Pending validation by a certified accountant or lawyer: limits of Civil Procedure Code (CPC) art. 738 (two thirds, minimum of one minimum wage and maximum of three), exclusion of the meal allowance from the net part, rules for maintenance (no. 4) and for tax enforcement (CPPT art. 227).

Expected result

• The garnishment is Active in Payroll › Prepare › Deductions and loans › Garnishments.
• On the next month's payslip, computed in the batch (see How to process the month's payroll), the Wage garnishment line appears in the Deductions column, added into Other deductions.
• Still to withhold shows what remains to be withheld from the claim (€2,000.00 as long as no payslip with the garnishment is validated). After you Validate the example payslip, Withheld so far shows €349.50, Still to withhold €1,650.50 and the Withheld amounts tab has the line, To deposit.
• On Account, the journal entry credits €349.50 to account 2781, with the payee's contact. Pay in Payroll › Pay › Settlement with creditors: the Delivery to a third party line shows that contact in Pay to. Pending validation by a certified accountant: account 2781 in the template. Paying in Settlement with creditors does not change the Withheld amounts tab: the line stays To deposit and opens read-only. For now, the Payroll Administrator cannot find in the menu where to record the deposit.

Important notes

• The garnishment must be Active to withhold. An Incoming or Validated garnishment does not affect the payslip yet.
• Check No other income. With it ticked, at least one minimum wage is non-garnishable, as in the example. Unticked, for an employee with a net part of €1,264.50, only two thirds (€843.00) were non-garnishable and €421.50 was withheld.
• Deposit deadlines. The withheld amount is paid within the deadline the notice sets (Days to deposit). Pending validation by a certified accountant or lawyer: the legal deposit deadline when the notice does not set one.
• Several garnishments. The order between garnishments of the same employee follows the Order set by the agent; the company's choice for order and conflict is in Payroll settings and is still to be validated by the accountant.

Common problems

“Some required fields are empty” appears when saving

• Cause: the Worker, the Process number or the Creditor is missing (the fields turn red).
• What to do: fill them in with the data from the notice and save.

“You cannot change a garnishment” appears when validating

• Message: “Invalid Operation You cannot change a garnishment. What happened: this step belongs to the Payroll Administrator profile, because it changes what is withheld from a worker. How to fix it: ask a user with the Payroll Administrator profile.”
• Cause: the profile is Payroll Processor.
• What to do: ask the Payroll Administrator to validate and activate the garnishment.

I clicked Activate and the garnishment stayed Validated

• Message: “Some required fields are empty. Fill in the fields marked in red to be able to save.”
• Cause: the Payee contact (accounting) is missing, under Where the withheld amount is paid.
• What to do: choose the contact and click Activate again. If the field answers No records, ask someone with the Accountant profile to create it. In Validated, the Account of the deposit can no longer be edited: fill it in before Validate (step 9).