As garnishment is a process of withholding funds from an individual’s earnings to repay debt obligations, generally employers are required to withhold part of the employee’s earnings and pay the withheld amount directly to the creditor (vendor). The SAP Payroll system supports this garnishment process under payroll processing by creating a garnishment order detail in infotype 0194 and a document deduction in infotype 0195. If any adjustments are required, they can be made using infotype 0216. You can see a brief overview of the SAP Payroll system’s garnishment process in Figure 1.

Figure 1

The garnishment process flow in SAP Payroll

In order to create a wage garnishment document, payroll first needs to know the creditor details. However, in some states (for example, Washington, Arizona, Nebraska, and New Mexico), the vendor details may not be known prior to or with the notice of garnishment. This is because, per these states’ regulations, individuals are given a grace period to respond to the court or reach a settlement. Therefore, there can be a gap wherein companies receive the notice of garnishment and the amount, but don’t know exactly who the creditor is. Generally, in such situations, the business might be able to figure out on its own the details for the vendor, but until the vendor details are confirmed, payment cannot be issued.

In the SAP system, the wage-garnishment processing steps are as follows:

1. For the employee whose pay is to be garnished, create a garnishment order (infotype 0194) with the case number, jurisdiction, category, originator, vendor, remittance rule, and so on, and a garnishment document (infotype 0195) with the deduction details.
2. Set up payroll processing to deduct the garnishment amounts from the employee’s paychecks. (Payroll processing is not covered in this article.)
3. Set the due date in the third-party posting for vendor payment and to post payment details to accounts payable (AP). Posting vendor payments to AP is a post-payroll activity in the US. (Third-party posting not covered in this article.)
4. AP processes the payment as per the vendor payment method (e.g., via check, ACH, and so on).

In the following sections I explore how to handle deductions for wage garnishments without confirmed vendors (creditors), how to hold funds until the vendor details are known, and how to post to AP for payment after the vendor details are confirmed. But first, I explain how to set up the required remittance rule.

Set Up a Remittance Rule

Before you can create the garnishment details, you need to have a remittance rule with a transfer interval of an indefinite period. To configure the remittance rule with an indefinite period, follow IMG menu path SAP Customizing Implementation Guide > Payroll > Payroll: USA > Garnishments > Master Data > Document > Remittance Rule for Bank Transfer > Define Remittance Rule. This results in the screen shown in Figure 2.

Figure 2

Create a new entry for the new bank remittance rule

Click the New Entries button to create the new remittance rule, and the screen shown in Figure 3 opens.

Figure 3

Create a remittance rule with an indefinite transfer interval

In this screen, enter the value N (Store indefinitely) in the transfer interval field. This sets the vendor payment due date as 12/31/9999 for garnishment to be withheld in payroll processing. You also enter the Country (US) and select the payment method (in this case, C for Check).  Click the save icon (circled) to save your configuration and exit.

Create a Wage Garnishment Document

Before you can create a wage garnishment document, you must have a vendor code. This is a mandatory field on infotype 0194, so you have to enter it even if you don’t have confirmed details. There are two options for doing this:

1. You can guess who the vendor is based on the originator garnishment notice.
2. You can use a generic or dummy vendor code to create a placeholder document in the system.

In either case, you have to use a remittance rule created above in Figure 2. This has a set due date as indefinite for payment to the vendor. Create garnishment document infotype 0194 as shown in Figure 4, and garnishment order infotype 0195 as per the order detail.

Figure 4

Create infotype 0194 with Waiting Garnishment (C) as the remittance rule

Set Up Payroll Processing and Third-Party Posting

As the new infotype has been created with the garnishment details, the deduction starts from the next payroll. Then, when the third-party evaluation is run (via transaction code PC00_M99_URME) these deductions are made as of 12/31/9999 as the vendor payment due date. You can check the deduction due date in the Garnishment history (via transaction code PA30). Once in infotype 194, in change mode, press History and the screen in Figure 5 opens.

Figure 5

The Garnishment history, showing the due date as an indefinite period

The third-party remittance posting (transaction code PC00_M99_URMP) generally runs for payee items that are due for payment (e.g., the due date should be on or before the day you want to remit your third-party payments). Line items with due dates of 12/31/9999 will never be outstanding for payment, and hence will never be posted to AP.

Releasing Withheld Garnishment Funds

Now that you’ve created the garnishment’s details by essentially using educated guesses to make the settings, and garnishment is being withheld, let’s leap ahead. In this scenario, after a few months, you receive the vendor’s confirmation details. There are two possible results. Either the assumed vendor is proved to be correct, or it’s wrong. Let’s examine both possibilities, and I’ll show how to ensure that the correct vendor payment is made in both scenarios.

Example 1: The Assumed Vendor is Right

If the assumed vendor is correct, you need to change the due date for withheld funds. This is so that when the next third-party posting runs, it will be due for payment, and it will be posted to AP. To change the due dates, follow these steps.

Execute transaction code PA30 to go to the garnishment document (infotype 0194). In the screen that opens (Figure 6) click the History button.

Figure 6

Change garnishment document to check the remittance details

This re-opens the garnishment history screen shown in Figure 5. Click the Due date (shaded in red on the right of the figure). This opens a pop-up window (Figure 7) with a list of the payroll runs for which garnishment was deducted.

Figure 7

Check all the pay dates where garnishments were deducted

Select the check box next to all of the payroll records you want to open, and click the Transfer button. In the pop-up window that opens (Figure 8) you can change the due dates. This is because currently the Old due date is 12/31/9999, and you need to change it to the next pay check date so that it can be posted to AP.

Figure 8

Enter the New due date for posting withheld garnishment funds to AP

The New due date can be a current or a later date. In this example, I enter 06/24/2015 as the New due date. Then click the green checkmark icon to change the due dates for all the selected entries, as shown in Figure 9.

Figure 9

The history of the garnishment with the new due date

Now that the vendor (creditor) details have been confirmed, you must correct the remittance rule on the Garnishment Document infotype 0194. Since the vendor details are correct, you only need to change the remittance rule. Earlier, in Figure 2, you set the Remittance field to Waiting Garnishment. Now you need to change it to Check Immediate in this example (or other rule as per requirement) as shown in Figure 10. You can access this screen by executing transaction code PA30. With this setting, the next garnishment deduction will be set to the next paycheck due date. Click the save icon to save your changes and exit.

Figure 10

Change the remittance rule with the new due date

With these changes, during the next payroll run the garnishment deduction is created with the new due date as per the new remittance rule. In addition, the third-party posting will now post the new total amounts due for vendor payment to AP, as shown in Figure 11.

Figure 11

Show the new posting to AP with a new due date that cannot be changed

Example 2: The Assumed Vendor is Wrong

If the assumed vendor is incorrect, you need to end the existing infotype 0194 and infotype 0195 records to stop the garnishment deduction for the incorrect vendor and create a new garnishment record with the correct vendor information to continue garnishment withholding. Also, you need to transfer the withheld garnishment funds from the old—incorrect creditor—to the new—correct—creditor. You do this by creating a refund with the old garnishment document and creating an additional deduction with a new garnishment document. These steps are explained below.

Before proceeding, you need to check the date of the last paycheck and the total withholding amount (the garnishment amount) withheld from the employee’s pay using the guessed vendor. To do this, check the payroll result or go to Garnishment History as shown in Figure 12.

Figure 12

Review and note the garnishment details, such as total deduction and last check date

Once you’ve checked the details, the next steps are to delimit the garnishment document (with the incorrect vendor), create an adjustment entry to refund the deducted amount, and create an additional deduction with new garnishment record to briefly re-allocate the funds in the system. Finally, you need to then pay the funds out again to the new, correct vendor.

To remove the existing garnishment records (infotypes 0194 and 0195), execute transaction code PA30 and change the end date fields as shown in Figures 13 and 14.

Figure 13

Delimit the incorrect vendor garnishment document record

Figure 14

Delimit the garnishment order record

The old garnishment document record is end dated after the last paycheck date. Changing the end date of infotype 0194 to fall in the next pay period helps process the refund for the garnishment withheld under the wrong vendor.

Refund Processing

Now, let’s move on to refunds. Refunds can be processed in one of two ways.

First option: The end date for infotype 0195 is the day after the last paycheck date, and the end date for infotype 0194 is as of the day of the last paycheck date. By ending the garnishment document (infotype 0195) on the day of the last paycheck date, you stop the garnishment deduction in the next payroll run, as you do not want to deduct any additional funds for the wrong creditor. However, the refund for the wrong vendor still needs to be processed. Extending infotype 0194’s validity to the next payroll helps to process the refund only in the next payroll, not in any subsequent payrolls. Also, after the refund is processed you should change the document status in infotype 0194 to Inactive to avoid any confusion or any impact in retroactive payroll. In this example, the end date for infotype 0195 is 06/22/2015 (which is the employee’s last paycheck date), while the end date for infotype 0194 is 06/23/2015.

Second option: If you want to keep the same end date on both infotypes, create a refund equivalent to the garnishment amount withheld, plus the next pay period’s deduction. This is required because, if the garnishment order is valid for next pay period, the deduction will take place before the next paycheck is processed. In this example, the garnishment amount to be created is $3,272.69 ($3,043.56 + $229.13 = $3,272.69).

In this example, I am using option one.

To create a refund, you need to go to the garnishment order. Execute transaction code PA30 and follow menu path Garnishment > Adjustment > Refund. The screen in Figure 15 opens where you can make the adjustment, as shown in the figure.

Figure 15

Create a refund of the garnishment withholdings

An important point to note here is that you have to use the garnishment deduction wage type, not the refund wage type. By using garnishment wage type for the refund you will avoid issues later, as explained below.

Create a New Garnishment Record

The next step in this process is to create a new Garnishment Document with the correct vendor code and remittance rule, as shown in Figure 16.

Figure 16

Enter the correct vendor and remittance rule details for the new garnishment record

After you have created new garnishment record with the correct vendor and remittance rule, you then need to create an additional deduction amount that is equivalent to the amount that is being refunded (shown in Figure 15). The additional deduction is to ensure that all of the garnishment amounts previously withheld from the employee’s past paychecks are now paid out to the correct vendor.

To create additional deductions, again execute transaction code PA30 to go to the garnishment order. Then follow menu path Garnishment > Adjustment > Additional Deduction, and the screen in Figure 17 opens. Here you make your entries for the additional deduction amount, as shown in the figure. Once you’ve made the required changes, click the save icon to save and exit.

Figure 17

Create an additional deduction for the garnishment

Next, payroll deducts the regular garnishment amount as well as the additional, make-up deduction. However, the pay stub only shows the regular deduction (Figure 18), as the refund was made under the garnishment wage type.

Figure 18

The remuneration statement shows only the regular garnishment deduction

The third-party posting posts the vendor payment information to AP for payment processing, which you can verify by viewing the new Garnishment history (Figure 19).

Figure 19

The garnishment remittance history showing all withheld funds posted to AP, payable to the correct vendor

Vinod Ray

Vinod K. Ray has over 17 years of SAP experience focused on the HCM process, with specialization in U.S. Payroll. He is experienced in global roll-out, solution design, and deployment of HR business processes across various industries. For the past few years, Vinod has been involved in delivery of SuccessFactors/SAP ERP HCM core hybrid solutions. Vinod is a Senior HCM Consultant at Capgemini US.

You may contact the author at vinod.ray@capgemini.com.

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