Execution of the Salary and the Right of Set-off
The execution authority may order the employer to freeze the payment of salary to an employee. The employer is in such a case obliged to retain the employee’s salary or a part thereof for the purposes of enforcement proceedings and pay the part directly to the authority. The freezing order includes also the instructions for counting the execution withholding. If the employer fails to retain the salary in an appropriate manner, the amount to be retained may become payable by the employer.
If an employer has a receivable from an employee, the starting point is that the employer has a right of set-off. This means that the employer may set-off the receivable against the employee’s salary. The receivable may e.g. be a loan granted by the employer to the employee, purchases from the employer or liability for damage. Holiday compensation, fringe benefits, provisions and different rewards are also considered pay, so it is possible to set them off.
The employer must demand for a set-off from the employee beforehand. After this demand the employer may set-off his/her claims regardless of the employees consent.
The employee is however protected by a number of statutory provisions which the employer must comply with. The most important is that the receivable must be clear and due and it is not possible to set off more than an amount equal to what can be retained from the salary in accordance with the Execution Act. This why the employer must find out the number of the persons whose maintenance the employee is liable. The employer must also calculate the amount of the execution withholding, the protected amount and the income limit.
It is possible to set off
maximum of two thirds of the net wage exceeding the protection portion specified below,
one third of the pay, if the pay is more than the below-mentioned protection portion times two or
a separately specified percentage of the pay that is higher than one third of the protection portion if the pay is more than four times the protection portion or more. If the pay is less than the protection portion, it cannot be set off.
In order to protect people with family and low income, legislation provides that a part of the employee’s salary is exempt from enforcement proceedings. In 2018 the amount is 22,41 euros per day for a debtor with a family and for a debtor with dependants, additional 8,04 euros per day per dependant. The amount is calculated by multiplying the daily protection portion by the number of those days from which the pay or other income under set off is paid. If the pay or other income is paid from a calendar month, the number of the days is always 30 The amount of the protection portion is verified annually.
It is possible for the employer to calculate the amount to be set off with an execution calculator which is found in Finnish on the Internet.
Restrictions on the right of set off are only applicable to salaries subject to enforcement proceedings. Salaries not subject to enforcement proceedings may be set off in full. Various travel costs are not regarded as salary and may therefore be set off freely, if a reasonable portion is left to the employee.