The concept of a Garnishee Order is something that has become quite topical in our modern debt-ridden society. It may seem pretty straight forward, but there are many pitfalls and potential mistakes that expose both the employer and the employee.
A Garnishee Order is a court order that has become an effective means of legal debt collection. It instructs the employer to make deductions from an employee's salary or wage in settlement of a debt owed by the employee to a third party creditor.
There are 3 main objectives and types of Garnishee Orders that serve different purposes:
1. Maintenance Order
This is usually obtained by a parent of a child through a Magistrates Court. An Employer must give priority to the payments specified in the notice over any other order of court requiring payments to be made from the employee’s salary or wages.
2. Tax Collection
In terms of the Income Tax Act No. 58 of 1962, SARS is entitled to initiate any collection proceedings including Agent Appointments for outstanding penalties or taxes due by an employee.
The form used for the purposes of Agent Appointments is referred to as an Agent Appointment Notice (IT88). It basically means that an employer becomes a SARS appointed agent.
3. Emolument Attachment Orders
A credit provider can collect a debt owed by the employee on a monthly or weekly basis.
Unfortunately a lot of Garnishee Orders are not validly issued and are often used irregularly by unscrupulous creditors. As an employer you therefore need to be extremely careful that you are complying with legislation, before you act on a demand to institute a Garnishee Order for an Employee.
An Emoluments Attachment Order or Maintenance Order will be delivered by the Sherriff of the Court. Before accepting these Garnishee Orders, the employer must:
1. Ask the Sherriff to produce identification
2. Ensure that the Garnishee Order:
Should any of these items not be present on the order, the employer is urged to seek urgent legal advice prior to accepting the order.
A SARS issued IT88 will be posted on an employer’s e@syFile software package. It is recommended that an employer’s payroll administrator regularly login to e@syFile and download any new IT88 instructions issued on current employees.
Before you implement a Garnishee Order for an employee you should inform the employee of Garnishee Orders issued and the effect, including the amount that will be deducted from the employee’s salary.
In an effort to assist the employee and ensure that they do not become victims of unscrupulous debt collectors, in the case of Emoluments Attachment Orders and Maintenance Orders, the Employer may ask the debt collector or Maintenance Court to furnish them with a copy of the employee’s Statement of Account. This will enable the employer to verify whether interest, costs and fees have been calculated in accordance with the National Credit Act of 2005.
The employee must be informed that on Emoluments Attachment Orders:
In terms of section 99 of the Income Tax Act No.58 of 1962, SARS is entitled to appoint an employer to act as its agent in collecting outstanding penalties or tax from an employee, without prior notice or permission from the employee. Should the employee query the order, they must consult with SARS directly. However this must not hinder the employer’s obligation to follow the order.
It is imperative that the first Garnishee Order deduction take place in the month following the serving of the order, to avoid further interest and costs to the employee.
With a SARS IT88 order, the employer is legally bound to transfer the amount of the tax debt to SARS within the due date specified on the IT88, using the reference number furnished.
With all Garnishee Orders, the employer will be held liable for the debt and may be criminally prosecuted for failure to comply.
Employers should bear in mind that while deductions are made from the employee’s salary, further interest and costs are accrued, making it difficult to reach a finite amount to be paid by the employee. It is therefore advisable for employers to request a Statement of Account from the debt collectors towards the end of the payment term to determine exactly when deductions should stop.
With a SARS issued IT88, the employer’s Agent Appointment responsibilities are terminated once SARS receives payment in full.
Should the employee resign, the employer should inform the debt collector or SARS of such with immediate effect.
Should the employee have insufficient funds available to comply with any of the Garnishee Orders issued, the employer should notify the debt collector or SARS with immediate effect to avoid possible legal action due to non-compliance.
In certain circumstances, Emoluments Attachment Orders can be withdrawn or overturned if the amounts instructed to be deducted exceed the available funds due to the employee. The employee must seek legal advice in this regard or contact:
Garnishee Orders are common practice but must be treated with extreme caution. There are unscrupulous creditors who will issue Garnishee Order demands that are illegal in an effort to recover what they claim is owed to them. There is also very complex legislation in place governing Garnishee Orders that an employer must be aware of and compliant with.
If you are facing a Garnishee Order demand for the first time and require any assistance with this, or if you would like an external assessment of your existing procedures, please make contact with us and we will do our best to assist you.
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