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Wage garnishments: What does that mean for the employer?

On April 9, 2015 by WePayPeople

One of your employees has got into financial trouble. What are you supposed to do as an employer? Because if an employee still has not paid their debts after a process of reminders, demands, summons and a court ruling, the creditor may, through a bailiff, turn to the employer to impose a wage garnishment.

In this blog we provide further information on wage garnishments. It is a fact that a wage garnishment always involves a lot of extra administration, not to mention the human aspect. More than 80% of the Dutch employers are faced with wage garnishments.

Are you obliged to carry out?

A creditor may use a wage garnishment to collect an outstanding debt. Usually a bailiff is engaged for this purpose. As an employer you must carry out a wage garnishment. But please note: only if a bailiff can serve a court ruling.  Government agencies (including the Tax and Customs Administration, the Education Executive Agency, the Central Fine Collection Agency and the Healthcare Insurance Board) do not need a court ruling, but they must have issued a writ of execution to the employee.

The employer is obliged to provide the information the bailiff or the collection officer requires. The wage garnishment is accompanied by a detailed questionnaire, which must be returned within 4 weeks. If you fail to do this, or if you provide incorrect information, you may be summoned yourself. In case of a refusal to cooperate with a wage garnishment the employer may be held liable for the claim on the employee.

Protected earnings level and payment

The employer is obliged to pay part of the wage to the bailiff. The protected earnings level calculated by the bailiff is taken into account. The protected earnings level is the minimum amount the employee must be paid for their daily costs of living. The protected earnings level will depend on the employee’s personal situation (age and civil status). To determine the protected earnings level the bailiff will request the data from the employee themselves. As an employer you will be well advised to assist your employee in mapping out their fixed charges; the protected earnings level is often calculated too low because an employee does not have a clear picture of all their expenses. All elements arising from the employment contract fall within the scope of the wage garnishment. Therefore, besides the periodic salary this also includes the holiday pay, 13th month, overtime allowance and bonuses. Tax-free expense allowances (for example travel expenses) do not fall within the scope of the wage garnishment, as these expenses are not part of the wages.

Several wage garnishments

It may occur that an employer receives several wage garnishments for the same employee. In that case the first bailiff to attach the earnings will be appointed as the main bailiff. The employer therefore will have one contact person and will only be required to make payments to that bailiff. The main attaching party then sees to the equitable distribution to the other attaching parties. However, in case there are several wage garnishments it will involve a questionnaire for each garnishment. Certain creditors rank first above other creditors. This is statutorily laid down as preference, and it usually concerns government agencies. The Tax and Customs Administration is the most well-known and its claims always take precedence over regular wage garnishments.

Assistance for the employee

Besides the above obligations, it may be even more important to talk to your employee. You will want to know what their problems are, where you can help and where you may be able to prevent trouble. More often than not there are private problems. Or they may suffer from a disease, an addiction or something else that might affect their performance. A good talk may clear the air and turn out to be a starting point for tackling the underlying problems.

Wage garnishment usually is not a reason for dismissal. For that, the garnishment should seriously affect the employee’s performance. Or there must be other issues that hinder their performance.

The employee may at all times make arrangements to prevent a wage garnishment, you may also support them in doing so. However, creditors may not always agree. An employee may also ask the employer for an advance payment, for example on the holiday pay. In most cases this only serves a purpose is there is but a small debt. Furthermore the employer has the option to engage a Nibud coach for the employee. In addition there are several agencies the employee may turn to for assistance, such as the municipality, the money-lending and debt counselling institution, social workers, Nibud, various volunteer organisations and debt assistance.

Termination of wage garnishment

A wage garnishment must be executed until the bailiff has confirmed in writing that it may be terminated. If the employee leaves the employment, the bailiff will have to be notified. If an employee had left the employment and is hired again, the wage garnishment will no longer be valid and a new garnishment will have to be effected.

Would you like to have more information?

Does this article raise any more questions? Please contact us on 020-716 33 84, or send an e-mail to os@wepaypeople.nl.