Garnishment formulas
Garnishment formulas are the part of garnishment rules that tell Payroll how to calculate the wages that are exempt from garnishments. Garnishment formulas determine the:
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Logic (equations) used to calculate exempt wages
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Variables (rates, exempt factors, amounts, percentages, and so on) used to calculate exempt wages
The logic used to calculate exempt wages is predefined and cannot be changed by the user without creating modifications to the application's code; however, you can change the variables.
For U.S. garnishment rules, you do not have to define variables for every garnishment rule. Whether you define variables depends on the requirements of the formula. U.S. garnishment formulas
For Canada garnishment rules, you must define variables for every garnishment rule. You define the amounts and percentages used to calculate exempt wages. You have control over these variables because the percentages and amounts used to calculate exempt wages vary from province to province.
Example U.S.
Two Rivers Company has garnishments for the State of Minnesota that use formula 18. For formula 18, Payroll calculates exempt wages as the lesser of:
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Rate multiplied by the Federal minimum wage
– or –
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A percent of disposable income
The variables are set up as follows:
| Variable | Value |
|---|---|
| Rate | 40 |
| Federal Minimum Wage | 5.25 |
| Factor 1 (percent of disposable income) | 75 |
Using the above variables, Payroll calculates the exempt disposable income the greater of 210.00 (40 multiplied by 5.25) or 75% of an employee's disposable income.
Example Canada
Two Rivers Company has garnishments for the province of Manitoba that use formula 63. For formula 63, the amount of wages exempt from garnishment depends on whether the employee has any dependents.
For employees with no dependents, at least 70% of their income must be exempt from wages, and that 70% must equal at least $250; however, no more than 90% of their wages can be exempt from garnishment.
For employees with one or more dependents, at least 70% of their income must be exempt from wages, and that 70% must equal at least $350; however, no more than 90% of their wages can be exempt from garnishment.
The variables are set up as follows:
| Number of Dependents | Basic Exempt Amount | Minimum Exempt Amount | Maximum Exempt Amount |
|---|---|---|---|
| 0 | 70% | $250 | 90% |
| 1 or more | 70% | $350 | 90% |