Wage deductions – enforcement after 1 July 2023. How will the increase in the subsistence minimum affect wage deductions?

Wage deductions are a means of enforcement by which a court bailiff reaches into the debtor’s net income, specifically their wages as an employee. In practice, this means that if the debtor does not repay their debt, the employer pays them only part of their net salary on the basis of an enforcement order. There is, however, a rule in this procedure that sets the maximum amount of the wage deductions, namely the amount of the claim and its accessories (for example, late-payment interest). This ensures that wage deductions never exceed this sum.

It is important to bear in mind that wage deductions are made only from the debtor’s net wage. The part of the wage that goes to pay taxes and social and health insurance cannot be touched. The social security of the employee-debtor is therefore protected and cannot be jeopardised by wage deductions.

From 1 July 2023, wage deductions are subject to a limit on the sum that must not be deducted from the wage of the employee-debtor. This limit is called the basic amount, and it ensures that after enforcement the debtor is left with enough income to meet the basic living needs of themselves and their family. The basic amount is calculated as 140% of the subsistence minimum, and at present the debtor must be left with at least €376.43 after the wage deductions.

It is important to note, however, that this sum is not always the same and may change depending on the level of the subsistence minimum. The legislation also sets different basic amounts depending on the type of claim being enforced through wage deductions. There are certain exceptions, for example for a maintenance claim or another priority claim.

Wage deductions for maintenance of a minor from 1 July 2023:

Where the aim is to secure payment of maintenance owed for a minor child, the basic amount is set separately – this is the special case or exception mentioned above. The legislator has set the lowest limit of the basic amount that must not be deducted from the debtor’s net wage for cases where the claim owed is maintenance for a minor child.

Maintenance for a minor child is regarded as the most important priority claim, which is why a specific figure has been set for the basic amount in this case. This basic amount is calculated as 60% of the subsistence minimum, which from 1 July 2023 comes to €161.32. 70% of this sum is then taken, which gives €112.93. It is precisely this sum of €112.93 that is the part of the debtor’s net wage that cannot be deducted when enforcement is carried out to secure repayment of maintenance owed for a minor child.

It is important to take this specific treatment of the basic amount into account for wage deductions where the debt relates to maintenance for a minor child. This measure ensures that the debtor is left with a sufficient sum to be able to care adequately for their minor child even while enforcement is under way.

Wage deductions for priority claims from 1 July 2023:

• Another special group for calculating the basic amount is other priority claims, that is, those not related to maintenance for a minor child.

The Enforcement Code (Exekučný poriadok) defines the following priority claims:

• Claims relating to maintenance,
• Claims for compensation for damage caused by injury to health,
• Claims for compensation for damage caused by an intentional criminal offence.
• Claims for compensation for damage to state property administered by a remand prison, a prison and the Directorate General of the Prison and Court Guard Corps against accused and convicted persons and against former accused and former convicted persons.
• Claims for taxes, fees and customs duties, claims for insurance contributions against persons who are obliged to pay health and social insurance contributions, for contributions to old-age pension saving, and others.

For priority claims, the basic amount that must not be deducted from the debtor’s net wage is set at 100% of the subsistence minimum for an adult individual. From 1 July 2023 this amount is €268.88. Lower limits are set in this way, ensuring that the debtor is left with a minimum sum from their net wage in all circumstances. The aim of this measure is to ensure faster and more effective recovery of amounts owed under claims that are regarded as the most important in society.

Wage deductions for parents and pension recipients from 1 July 2023:

The legislation takes due account of the debtor’s obligation to support other persons, which may include caring for a minor child or, in the case of pensioners, providing for the livelihood of another person. The purpose of the basic amount is to ensure sufficient income to meet basic living needs. Family obligations therefore also have to be taken into account when calculating this amount.

For parents who care for a minor child and have a debt, for example on a loan, the sum of €376.43 subtracted from their net wage will be increased by €94.10, which is 25% of the basic amount.

The basic amount of 140% of the subsistence minimum likewise applies to pension recipients. However, if the pension recipient also supports another person, a further 50% of the basic amount is added to the basic amount.

For pension recipients, the basic amount subtracted will therefore be 140% of the subsistence minimum, with an additional item of 50% of the basic amount if they care for another person. This is a larger share than for ordinary working people, where only 25% of the basic amount is added if the debtor is a parent supporting a minor child.

This ensures that wage deductions take into account the particular circumstances of debtors and their obligations towards other persons, which helps to secure an adequate standard of living for families and pension recipients during enforcement.

Scope of wage deductions – the rule of thirds:

Even though the basic amount cannot be deducted from the debtor’s net wage, the debtor will not ultimately be left with only €376.43 of, for example, their total wage. The Enforcement Code regulates the so-called rule of thirds, which sets out the procedure by which wage deductions are made.

First, the basic amount is subtracted from the net wage. The remainder is then rounded down to the euro cent so that it is divisible by three. Enforcement then proceeds against the individual thirds of this rounded remainder. How many thirds are used to pay off the debt depends on whether the deductions are being made to pay priority or non-priority claims.

For non-priority claims, the deduction is made only from the first third of the remainder after the basic amount has been subtracted. For priority claims, up to two thirds of this remainder may be used, but the second third is used first to pay off the priority claims, and only if it is not enough will the priority claims also be paid by deductions from the first third, together with the non-priority claims.

This sets out the procedure for wage deductions, which ensures that the debtor is left with a reasonable part of their wage to meet their living needs, while the priorities for recovering priority claims are respected.

Deductions without limit from 1 July 2023:

The change in the subsistence minimum also affects another aspect of enforcement deductions. Subtracting the basic amount from the net wage gives the so-called remainder of the net wage. If this remainder of the net wage exceeds three times the basic amount, that is, three times €376.43, the whole part of the sum that exceeds this triple amount may be subject to enforcement deductions.

This is called “deductions without limit”. It does not matter how large this excess sum is or what its specific extent is. If, for example, we had an employee with a net income of €1,500, the remainder of the net wage would be €1,123.57, so deductions without limit could not be applied. However, under the regulation, from 1 July 2023 the sum above which enforcement is without limit is set at €1,129.29.

The calculation is as follows: 1,500 – 376.43 = €1,123.57 (which is less than €1,129.29, above which enforcement without limit is possible).

When it comes to recovering non-priority claims, for wage deductions to be applied to an employee, the employee would have to earn a net income of at least approximately €1,505.73.

Thanks to this regulation of enforcement deductions, debtors with lower incomes are protected from an excessive enforcement burden, and deductions from pay are in line with their financial situation.