Having your wages or an employee’s wages garnished to pay off an outstanding debt can be a hard pill to swallow. Unfortunately, it can happen to anyone and might be more common than you think – don’t panic, you’ll get through this, and the best way to do it is to understand the facts surrounding payroll garnishments in Canada.
Whether you’re an employee or the payroll administrator, you may have experienced the effects of pending debt and the looming deadline to pay them. If your employee’s wages have been garnished, it’s better to know in advance how to deal with it to help fend off any fear of bankruptcy and assure them everything will be okay.
To help you and your team get through wage garnishment together, we’ve gathered the essential facts about the process, so you don’t have to.
How does payroll garnishment work?
Through the appropriate legal channels, a creditor can legally access a debtor’s wages to pay off an owed debt. It starts with an employer receiving a garnishing order from a creditor, this leads to the employer deducting a set amount from their employee’s paycheck and sending it to the creditor – in a nutshell, that’s how wage garnishment works.
Like anything in payroll, the wage garnishment process can be complex when it comes to the details. The process involves multiple parties, plus guidelines for disputing a garnishment like legislation for exemptions and different avenues for paying the debt.
There is one thing payroll professionals need to understand when dealing with a garnishment situation – if you have a payroll garnishee on your payroll, the best thing to do is to comply or dispute – never ignore. For all the options available to you, refusing to pay is not the choice you want to make. It carries serious consequences that can easily be avoided.
“If you have a payroll garnishee on your payroll, the best thing to do is to comply or dispute – never ignore the situation.”
Does wage garnishment affect you?
A few parties are at play here – the debtor (employee), the creditor (to whom the debt is owed), the court, and the employer. Regardless of which party you are, it’s good to know where everyone stands.
The Creditor and the Court
You'll likely be the employee or the employer in this situation, either way, it’s valuable to understand the measures taken by the creditor.
The process begins when an employee owes a debt to a creditor. The creditor follows a garnishing process to obtain the amount owed to them. The creditor must go to court to get a judgment against the debtor to establish that a debt is owed, and then separately apply for a garnishing order. When granted, the garnishing order is sent to the employer.
Most, but not all garnish requests from a creditor are approved through the court system before being served to the employer. Exceptions to a court order apply in a few cases:
- If an employee has signed an assignment of wages agreement with a credit union, they’ve essentially voluntarily agreed to pay their debt through their wages, so no court action is needed
- If an employer receives a wage garnishment order from the CRA
That’s the creditor side of things. Now, this is the step where, whether you’re an employee with a debt or an employer served with a garnishing order, it gets a little personal. From here on out, the garnishment process directly affects you and your organization’s payroll.
The role of Payroll
As a payroll professional, you care about wage garnishments because it affects the employees under your management, your payroll process, and your company by extension.
You’ll likely deal with a payroll garnishee sooner or later, so why not be prepared ahead of time? By mastering the ins and outs now, you’ll save yourself the headache of figuring things out last minute.
What a payroll garnishee means for you
When your business is served an official garnishing order, you’ll receive a letter containing all the relevant information pertinent to you and your employee – how much your employee owes, how to calculate the garnishment amount, and where to send the funds.
Calculating payroll is second nature to you, the only difference is subtracting the wage garnishment amount from your employee’s earnings and drafting them a paycheck for the remainder. The garnishment order letter will instruct on how to handle the rest.
We’ll take a gamble here and assume you’re as finicky about all things payroll as the next payroll professional. To assuage your concerns, you can take your preparation to the next level with a predetermined checklist of all the details you’ll want to take care of the next time you’re handed a garnishee.
Wage Garnishment Checklist:
1. Notify the employee
Since you will receive the garnishing order first, you’ll likely know what’s going on before your employee does. Let them know right away in a confidential manner so they can make the choice to pay a chunk out of their wages or dispute the garnishment order – it’s up to them, but you don’t want to delay the process. Your biggest nightmare as a payroll professional is non-compliance. Failure to comply means a personal debt transferred to your company on behalf of the employee, which you’ll want to avoid at all costs.
2. Maintain privacy
Do not hand out your employee’s personal information to just anyone requesting it, especially not without their consent. To make the distinction, examine what lines of information are reasonable to provide to a law firm representing a creditor with a garnishing order against your employee, and what’s best to limit to the internal team handling the garnishment order?
3. Determine exemptions and wages
Specific legislation dictates the allowable garnishable amount from your employee's earnings, as well as amounts that are subject to exemptions that can be based on net pay and sometimes on the employee’s dependents. Garnishable wages and applicable exemptions both depend on provincial legislation.
This quick rundown should give you an idea of where to start when you’re building out your garnishee guidelines, but check out this post for an in-depth list on managing garnishments as an employer.
Handling garnishees as an employee
As an employee, you want to protect your job, which means you need to know your rights to have a solid grasp of your options.
So, what can you do when served a garnishing order on your wages?
Well, two things. In some cases, you can file a dispute note in court claiming you don’t owe the creditor anything, your creditor can disagree, and the result of the matter rests with the judge.
Essentially, the judgment will be based on the legislation of your specific province or territory of residence – click on the link of your province or territory below to see specific provincial legislation.
Your garnishee options according to provincial and territorial legislation
Provincial and territorial legislation regulate the amount of wage garnishment a creditor can demand, based on an employee’s level of debt, exemption amounts on employee wages or salary, and general governmental rules. If your wages have been garnished, it’s important to know the legalities affecting you.
Find your provincial garnishment legislation below:
Exemptions: 50% of wages are exempt, with the minimum exemption at $800 and the maximum exemption at $3200, plus $200 for each dependent.
See more on Alberta payroll garnishee legislation (Section 40.2).
Exemptions: 70% of wages are exempt, with the minimum exemption is $100 for an individual with no dependents, and $200 for an individual with one or more dependents.
See more on B.C. payroll garnishee legislation.
Exemptions: 70% of wages are exempt, with the minimum exemption at $1500 plus $350 for each dependent.
See more on Saskatchewan payroll garnishee legislation (Section 23.7).
Exemptions: 70% of wages are exempt, with the minimum exemption at $250 for an individual with no dependents, and $2350 for an individual with one or more dependents.
See more on Manitoba payroll garnishee legislation (Section 5).
Exemptions: 80% of wages are exempt, unless otherwise ordered by a judge.
See more on Ontario payroll garnishee legislation (Section 7).
Exemptions: 70% of wages are exempt, determined by a formula laid out in Section 698 of the Code of Civil Procedure.
See more on Quebec payroll garnishee legislation.
Newfoundland and Labrador
Exemptions: The minimum exemption is:
- $963 for individuals with one or more dependants plus $47 per each additional dependent
- $1,019 for individuals with a spouse or cohabiting partner
- $1,059 for individuals with a spouse or cohabiting partner and one dependent plus $47 per each additional dependent
- $649 for individuals with no spouse, cohabiting partner or dependent
Exemptions: The Garnishee Act has been repealed and creditors now have the ability to garnish debtors.
See more on New Brunswick payroll garnishee legislation (Section 9).
Exemptions: 50% of gross wages are exempt, with the minimum exemption at $450 for an individual with a dependent and $330 for any other individual.
See more on Nova Scotia payroll garnishee legislation (Section 79.08).
Prince Edward Island
Exemptions: An exemption is determined based on an individual’s financial needs and the number of dependents.
See more on Prince Edward Island payroll garnishee legislation.
Exemptions: 70% of wages are exempt, with the minimum exemption at:
- $600 for a single individual
- $1,000 for an individual with one to three dependents plus $150 for each additional dependent
See more on Yukon payroll garnishee legislation (Page 12).
Exemptions: 70% of net wages are exempt.
See more on Yukon payroll garnishee legislation.
Exemptions: 70% of wages are exempt, with a minimum exemption at $1500 plus $300 per dependent, and a maximum exemption at $3500 plus $3000 per dependent.
See more on Yukon payroll garnishee legislation (Section 7 (2)).
Anything else you should know?
If you still have questions, The Canadian Payroll Association's series on Managing Garnishments is a great resource for an extensive look at legislation, policies, and processes related to garnishments.