Making payroll deductions on behalf of third parties is an administrative nightmare for many large companies, which are increasingly turning to outsourced service providers to manage the process for them. Court orders requiring employers to attach a portion of an employee’s salary are a particular headache. These are typically maintenance or garnishee orders issued on behalf of a creditor.
“Garnishee orders can be very complex to manage,” says Peter Schmitt of service provider SynRec.
“Payroll administrators are not lawyers, and often the orders are difficult to interpret.”
“Yet employers need to scrutinise them very carefully, because the system is widely abused and many employees suffer needlessly as a result. Even when orders are legitimate, there is still the administrative problem of reconciliation and payments.” SynRec helps employers manage and control the process. “We calculate all interest and administration costs ourselves, to protect employees from unscrupulous debt collectors and attorneys who try to claim costs they aren’t entitled to in terms of the court order,” says Schmitt.
“We also calculate employee deduction costs each month and send payment schedules to attorneys.”
Schmitt says this saves employers, particularly payroll administrators, an enormous amount of time. “Payroll programmes were never developed as a complex third party deduction system,” he says.
“They do tax calculations and basic deductions, but are not set up to calculate interest and fees. Instead of trying to make multiple, complex changes to the payroll, we aggregate information from multiple creditors so there are only one to three simple deductions. “Without the service, some employers are looking at over ten deductions for each employee; in some cases as many as 40.”
SynRec then does all the necessary reconciliations and payment schedules – and in many cases, working with partner Sage Pay, actually makes third party payments on behalf of employers. “Some employers are happy to process their own payments once SynRec delivers the information, but making multiple payments via several different banks to people who are neither on the payroll nor suppliers can be an administrative and security nightmare,” says Sage Pay’s Charles Pittaway. “Our system provides an easy payment gateway for SynRec – and the employer only has to make a single lump sum payment to one supplier. We do all the work of allocating it correctly to the third parties.”
SynRec’s clients include large organisations such as Pioneer Foods, British American Tobacco, Afrox, Coca-Cola, PPC cement, Parmalat and Nelson Mandela Bay Metropolitan Municipality.