Garnishment of Wages and the Right of Set-off
The National Enforcement Authority of Finland may order the employer to prohibit the payment of wages to an employee. The employer is in such a case obliged to deduct the employee’s wages or a part thereof for the purposes of enforcement proceedings and remit the part directly to the National Enforcement Authority. The prohibition on payments includes instructions on how to calculate the amount to be deducted. If the employer fails to deduct the wages appropriately, the amount to be deducted may be collected from the employer.
If the employer has a receivable from the employee, the employer is in principle entitled to set off its own receivable from the employee's enforceable wages. The receivable may be a loan from the employer, purchases from the employer or compensation for damages, for example. Holiday pay, fringe benefits, commissions and various types of bonuses are considered wages, so they can also be set off.
The set-off must be demanded from the employee in advance. Once the demand has been made, the employer may set off its receivable, regardless of the employee's consent.
The employee is however protected by some mandatory provisions. The most important provision is that the receivables to be garnished must be opposite (i.e. the creditor of the receivable is the debtor of the counterclaim) and of the same nature (e.g. a monetary debt), the receivable used for the garnishment must be enforceable (the receivable could be subject to a performance judgment in court, i.e. the receivable is, among other things, valid and overdue), and that no more may be garnished from the wages than may be garnished under the Enforcement Code. Therefore, before the garnishment, the employer must find out the number of dependents whose maintenance the employee is liable to provide for and calculate the amount of the garnishment, the protected portion and the income limit.
The amount garnished from periodically paid wages therefore is
no more than two thirds of the debtor’s net wages exceeding the debtor’s protected portion,
one third of the wages if the wages are more than twice the amount of the debtor's protected portion, or
one third or a higher portion of the wages, as separately defined in the regulation, if the wages is more than four times the amount of the protected portion of the debtor or more. However, no more than half of the wages may be garnished. If the wages are less than the protected portion, nothing can be garnished.
In order to protect low-income families, a protected portion has been established in the garnishment procedure, which is in all cases excluded from enforcement. The amount of the protected portion is regulated by law and is adjusted annually by a Decree of the Ministry of Justice. The protected portion is calculated by multiplying the daily protected portion by the number of days for which the withheld wages or other income is paid. If the wages or other income is paid for a calendar month, the number of days is always 30.
The amount garnished from other than periodically paid wages is one third from each instalment of wages.
The employer can calculate the instalment of wages to be garnished (set off) using a prohibition on payments calculator.
The set-off restrictions apply only to instalments of wages subject to garnishment. Instalments of wages that are not subject to garnishment may be set off in full. Miscellaneous allowances, such as reimbursement of travel expenses, are not considered as wages, so the employer is entitled to set them off, provided that a reasonable portion is left to the employee.