In some cases, a garnishment order may require that a percentage of the net income must be garnished. Net income is gross income less statutory deductions like EI, CPP, and Income Tax.
The easiest way to setup a deduction code for this kind of garnishment is to
Statutory Deductions Accumulator
The statutory deductions accumulator will add up the total amount of EI, CPP, and Income Tax for each employee every pay period. Because accumulator amount can be accessed in formulas using their corresponding variable we can use this accumulator to easily calculate the net pay in the garnishment formula later.
Create a new accumulator for the statutory deductions:
Canadian Payroll > Installation and Maintenance > Payroll Parameters
Create a new accumulator from the
Accumulatorstab by entering a meaningful name and choosing the
The new accumulator will need to be added to each Deduction Code for the statutory deductions (EI, CPP, and Income Tax).
Canadian Payroll > Employer Payroll Tables > Deduction/Benefit Codesand open the statutory deduction code to add to the accumulator.
Accumulatorstab enable the accumulator within the
Add Deductionslisting. Doing this will add any deduction amount to the accumulator total during payroll processing.
You can view the accumulator total during payroll processing by enabling the Show Accumulators option from the Process Pay Run window.
Next up we’ll create a formula driven deduction code using the accumulator we just created to calculate a garnishment of net deduction.
Garnishment of Net Deduction Code
The garnishment code will follow the setup of the basic garnishment deduction code.
The code will run for each pay period of any employee that it has been added, automatically garnishing a percent of the net wages. The code will continue doing this each pay period until some total garnishment amount has been reach or the code is removed from the employee.
We will be making use of the two user-defined variables (V34 and V35) on the deduction code to allow the garnishment to be customized for each employee. These variables are used to specify the total garnishment amount and the garnishment percent.
The following formula variables are used in the formula for the net garnishment deduction.
The formula for the net garnishment is below and has been separated into 5 lines to make each step clear.
The variable for the statutory deductions accumulator (A8) may need to be updated below to match with the accumulator created previously.
The first line of the formula calculates the net income by subtracting the statutory deductions from gross income.
The second line here converts the garnishment percent into a decimal amount to be used in the next line.
The third line calculates the garnishment amount from net.
The fourth line calculates the remaining garnishment amount (how much of the total garnishment amount is unpaid). This is done by subtracting the YTD deduction amount for this garnishment from the total garnishment amount.
The final line prevents the garnishment from being over-deducted.
If the garnishment has been paid up to the total garnishment amount then we set the deduction amount to 0.
Otherwise, the lowest of either the remaining garnishment amount or the garnishment amount from net is deducted.
Doing this extra step prevents the garnishment from being over-deducted in the case that the remaining garnishment is less than the garnishment amount from net.
Setup a Garnishment on an Employee
The garnishment of net deduction code will have to be added to the employee garnished. When the deduction code is added to an employee you will be able to change the two user-defined variables to customize the garnishment for that employee.
Add the garnishment of net deduction code to the Deduction/Benefit Codes of the employee’s Employee Profile.
Deduction/Benefits > Deduction/Benefit Codestab press Insert.
Select the garnishment of net for the Deduction Code.
Enter the Percent of Net.
Enter the Garnish Amount.
Press OK to save and add the garnishment of net deduction code to the employee.
Result of Garnishment
When the employee’s payroll is processed the garnishment is automatically calculated and deducted from their net income.
The employee Richard Zest in this example has been garnished at 15% of their net income.
Checking the Payroll Register report we can see that the garnishment of net (GARNET) deduction amount of $232.63 was correctly calculated as follows:
2000 - ( 92.34 + 33.20 + 323.57 ) = 1550.89 1550.89 * 15% = 232.63