Garnishing Wages

You may come across the situation whereby you are issued with a court order to withhold an amount from an employee's pays and transfer it to a specified agency.

This is referred to as garnishing an employee's wages and examples include the Child Support Agency and credit agencies.

Initial Setup

If the order is for Child Support, it is likely that the required setup is already done for you:

In Marlin HR select System > Deductions and determine whether there is a deduction in the list called Child Support. If so, you can skip this section and jump down to the Applying Garnish To An Employee section below.

If the order is not for Child Support, or you don't already have a Child Support deduction setup, you will need to follow these steps:

Decide whether you would prefer the withheld amounts to be posted to a liability account in the General Ledger (GL) or to a Supplier account. The main difference is that, when you transfer the amounts to the agency, you enter journals to clear the balance from a liability account, or supplier purchases to clear the balance from a Supplier.

In your GL, create a liability account or a Supplier account:

• E.g. For child support: create a liability account called Child Support or a Supplier called Child Support Agency.
• E.g. For anything else: create a liability account called Garnish Wages for example.

In Marlin HR, select System > Payroll Liability Account and create one for this purpose (e.g. called Child Support or Garnish Wages). Point it to the liability account or supplier you chose in the GL.

In Marlin HR, select System > Deductions and create one for this purpose (e.g. called Child Support or Garnish Wages) and point it to the Payroll Liability Account that you created in the previous step.

If you use the bank file (automatically generated by each pay run) to pay the wages and want the withheld pay to automatically be paid to the collecting agency by this bank file, tick the Pay During Payrun checkbox. Otherwise, leave it blank and the amount will be posted to the liability account or supplier account in the GL that you chose above.

You now have an appropriate Deduction setup that links to the Payroll Liability Account that in turn points to the appropriate liability account or supplier in your GL.

You can now apply the deduction to the relevant employee(s).

Applying a Garnish to an Employee

Open Employee Maintenance and select the Pay Details tab.

Click on the Add button at the bottom of the Deductions panel.

Select the appropriate Deduction (e.g. Child Support or Garnish Wages).

Select the appropriate Payroll Liability Account (e.g. Child Support or Garnish Wages).

Enter the Reference Number provided by the agency issuing the garnish order (this is only used if you ticked the Pay During Payrun checkbox on the Deduction setup so that the payment to the agency is included in the wages banking file).

Enter the amount ordered to be withheld each pay.

Click on the OK button.

Paying the Agency

Each normal pay (i.e. not Adjustment Pays or Termination Pays) will now withhold the amount you entered in Employee Maintenance.

If you ticked the Pay During Payrun checkbox on the Deduction setup, the amount will automatically be paid to the collecting agency when you use the bank file to pay the wages and the Reference Number you entered (see diagram above) will be included in the bank file so that the agency will know who the payment is for. As it is already paid, the amount will not be posted to your GL.

Otherwise, you will need to periodically clear the balance posted to the GL as follows.

If you setup the Payroll Liability Account in Marlin HR to post the withheld amount to a liability account in the GL:

• Pay the money to the agency (eg. via online banking).
• In the GL, perform a journal to clear the paid amount (e.g. Debit the Child Support liability account and Credit your Bank Account).

If you setup the Payroll Liability Account in Marlin HR to post the withheld amount to a Supplier in the GL:

• In the GL, perform a Supplier payment to clear the paid amount.