With interest rates rising and life becoming hard for many South Africans, we have had many queries around garnishees and maintenance orders – more specifically what the employer’s responsibilities are when an employee leaves their employment and an order is in place.
A garnishee order is a legal process where a court requires an individual or an organisation (the garnishee) to pay a portion of a person’s debt directly to the creditor, instead of the debt being paid by the person who owes the debt (the debtor). The garnishee may be an employer, a bank, or any other third party that holds the debtor’s funds. The court order directs the garnishee to hold a specific amount of the debtor’s funds, until the debt is fully paid up. This process is usually used as a last resort when the debtor has failed to make payments to the creditor, and other methods of debt collection have also been unsuccessful.
There are three main objectives and types of garnishee orders that serve different purposes:
- 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.
- 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), and in essence means that an employer becomes a SARS appointed agent.
- Emolument attachment orders
A credit provider can collect a debt owed by the employee on a monthly or weekly basis.
What is the employer’s responsibility upon receiving a garnishee order?
An emoluments attachment order or maintenance order will be delivered by the Sherriff of the Court. Before accepting these garnishee orders, the employer must:
- Ask the Sherriff to produce identification.
- Ensure that the garnishee order:
- Was correctly stamped by the Clerk of the Court. Their dated stamp must be clearly displayed on the document and the stamp must reflect the court out of which the order was issued.
- Was issued within the jurisdiction of the employer’s business.
- Clearly displays the case number.
- Properly identifies the employee on the document.
- States the outstanding debt amount.
- Specifies the amounts to be deducted from the employee’s salary until such time as the debt and costs have been settled in full.
- Displays what day of the month or week the deductions must be affected and paid to the maintenance court, or the credit provider’s debt collector.
- The debt collector’s contact details, contact person and banking details appear on the document.
Should any of these items not be present on the order, the employer should 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 logs in to e@syFile and downloads any new IT88 instructions issued on current employees.
Consultation with your employee
Before you implement a garnishee order for an employee, you should inform them that it has been issued and the effect, including the amount that will be deducted from their salary.
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.
Adding the garnishee order to the employee’s payslip
It is imperative that the first garnishee order deduction takes 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.
Remember that with all garnishee orders, the employer will be held liable for the debt and may be criminally prosecuted for failure to comply with regulations.
Terminating garnishee order deductions and payments
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 immediately. The law states: “in the event that the person against whom the order is granted leaves the employment of the employer who received service of the order, the employer must notify the maintenance officer in writing within seven days”.
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. If this is the case, the employee should seek legal advice or contact:
- The Association of Debt Recovery Agents: adraonline.co.za
- The Debt Collectors Council: debtcol-council.co.za
- The National Credit Regulator: ncr.org
How we can help
If you are an outsourced payroll client of HRTorQue, you will probably already know that we pay several garnishees and maintenance orders for our clients. We also inform our clients when they are legally appointed to transfer the amount of the tax debt to SARS, and manage the process for them. We are available for ad hoc advice and assistance when requested, and can also inform the debt collector or SARS on your behalf when an employee resigns.
Please contact [email protected] if you wish to find out more about our services.