Attachment of earnings for employees
If a debtor is unable to pay outstanding debts, this often leads to enforcement proceedings. If the debtor is an employee, the attachment of earnings is a popular choice for many creditors as the holder of the claim.
The attachment of earnings requires the employer to be served with an attachment and transfer order. As a consequence, the employer becomes a third-party debtor of the claim holder and may only transfer the wages subject to attachment to the claim holder and no longer to the employee.
Attachment exemption limits must be observed
Section 850 (1) of the Code of Civil Procedure (ZPO) stipulates that earned income can only be attached to the extent defined in Sections 850a to 850i. Therefore, employers are also required to comply with the statutory attachment exemption limits to protect the minimum subsistence level of the employee. A certain amount of the salary cannot be attached and must be paid out to the employee.
Employers must be aware of this because if the employer attaches an excessive amount, they are then obliged to reimburse the employee for any excess amounts attached and would also have to indemnify the debtor. This is often time-consuming and stressful.
New attachment exemption limits as of July 1, 2024
As every year, the attachment exemption limits were raised at the beginning of July 2024: Instead of the previous net amount of EUR 1,402.28, the attachment exemption limit is now EUR 1,491.75 net per month. Employees without maintenance obligations must generally retain this amount from their salary.
Furthermore, certain areas of income may be wholly or partially exempt from attachment. This includes expense allowances, pension, and support benefits, etc. (See sections 850a, 850b of the Code of Civil Procedure (ZPO)). Conversely, where the attachment involves maintenance claims (such as. for children), the protected attachment amount may also be significantly lower.
Federal Court of Justice: The inflation compensation bonus is attachable
Can inflation compensation bonuses be garnished? The Federal Court of Justice (BGH) recently confirmed this (decision dated April 25, 2024, Ref.: IX ZB 55/23).
The law contains no reference regarding the attachment of inflation compensation bonuses and to date Germany’s highest legal instance had not ruled on whether inflation compensation bonuses count as attachable income.
This particular case before the Federal Court of Justice involved a privately insolvent employee who applied for attachment protection for his inflation compensation bonus pursuant to Section 765a of the Code of Civil Procedure (ZPO). However, his case was also unsuccessful before the Federal Court of Justice.
The Federal Court of Justice ruled that inflation compensation bonuses are earned income and, therefore, attachable pursuant to the statutory provisions. The bonuses are not state benefits but rather voluntary payments made by the employer which are exempt from tax and social security contributions in addition to wages. Even if these bonuses are only paid once or in installments, they nevertheless represent an additional part of the employee’s remuneration because they are not linked to overtime or special services, etc.
Hardship allowance? Specified purpose?
The Federal Court of Justice also rejected other forms of attachment protection: Inflation compensation bonuses are not a protected hardship allowance because the bonus does not serve as compensation for hardships arising from the employment relationship. Nor are they intended to serve as non-garnishable compensation for specific actual expenses. Nor do they have a specified purpose as a non-garnishable claim on the part of the employee: The inflation compensation bonus does not have a genuine specified purpose, as is the case with corona aid.
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Summary of the key facts:
- The attachment of employees’ wages represents a popular option among creditors: Income from employment as a recurring payment is a safe and simple means for creditors to enforce claims.
- In the case of attachment of earnings, statutory attachment exemption limits apply and employers must ensure that they do not exceed these when transferring the attached wages to the creditor.
- The federal Court of Justice has ruled that inflation compensation bonuses are attachable earned income and are also subject to attachment within the scope of the exemption limits.
