Chamber’s Proposal to Reduce Employers’ Burden Related to Wage Garnishment Orders
The Chamber once again reached out to the Ministry of Justice with a proposal to alleviate the burden and costs employers face when handling wage garnishment orders for indebted employees. Resolving this issue could save employers tens or even hundreds of thousands of work hours each year and reduce associated costs.
When a bailiff issues a wage garnishment order for an indebted employee, it imposes several obligations and costs on the employer, unrelated to their primary business activities.
Significant Burden on Employers Due to Wage Garnishment
First, the employer must review and understand the garnishment order, which may require gathering background information from legislation or other sources, as well as communicating with colleagues and the bailiff. This process can be especially time-consuming for companies with limited experience in such matters. The complexity increases if the employer receives multiple garnishment orders for a single employee from different bailiffs.
The employer must also gather additional information from the indebted employee, such as the number of dependents, and report this information to the bailiff. If the information provided by the employee does not match that known to the bailiff, the employer must inform the bailiff.
Additionally, the employer is responsible for calculating the amount to withhold from the employee’s wages. This calculation can be complicated due to various factors, such as the number of dependents, daily allowances, and fringe benefits. The process becomes even more challenging if there are multiple garnishment orders from different bailiffs for the same employee, and the employee's wage does not cover all debts.
Employers must then withhold the required amount from wages, transfer it to the bailiff’s account, and keep records of the outstanding debt balance.
Three Possible Solutions to Reduce Employers’ Burden
Despite the significant administrative tasks associated with garnishment orders, employers are not reimbursed for the costs incurred. The Chamber requested that the Ministry of Justice find a timely solution to this problem and provided suggestions to improve the current situation.
One proposed solution is that if the employee’s wages are paid into an account at an Estonian financial institution, the employer could inform the bailiff of the employee’s account details and wage amount. In this case, the employer would not need to calculate the garnishment amount or make direct transfers to the bailiff; this responsibility would fall to the bailiff.
Another option would be for the bailiff to reimburse the employer, upon request, for costs associated with processing garnishment orders, either as a fixed sum or a percentage of the withheld wages.
A third alternative would allow the employer to notify the bailiff of the employee’s wage amount and provide other relevant information after receiving the garnishment order. The bailiff (or bailiffs, if there are multiple orders for the same employee) would then calculate the amount to be withheld and distributed. Under this arrangement, the employer would only be responsible for making the monthly transfers to the employee and the bailiff(s), without having to calculate the garnishment amount.